In June 2022, the benchmark S&P 500 stock market index officially closed 20% below its all-time high. The majority of Wall Street analysts agreed that moment marked the technical beginning of a bear market, and stocks continued to fall until October.
But the S&P 500 is now trading more than 20% above that October low point, which has led some analysts to declare the beginning of a new bull market. There is plenty of disagreement, because other investment professionals believe the index needs to reclaim its previous all-time high in order to officially be in bull territory.
If you're a long-term investor, the official classification of the broader market shouldn't matter, because history is proof the S&P 500 always reaches new heights given enough time. It's more important to focus on buying shares in quality businesses with strong growth potential, with the intention of holding on for at least five years. An official bull market is almost certain to occur within that time frame.
Below, I'll share two stocks that fit the bill.
1. Oracle
Oracle (ORCL 2.02%) stock recorded new all-time highs this year on the back of the artificial intelligence (AI) frenzy -- but make no mistake, its surge in value is very real. Oracle was a leader in database management software in the 1970s, before helping its customers prepare for the internet age in the 1990s. It has since established a dominant position in the fast-growing cloud computing sector, with the official introduction of Oracle Cloud Infrastructure in 2016.
It's no surprise, then, that the company is already one of the leading figures in the emerging artificial intelligence space. AI is dependent on the cloud because it's where companies store their valuable data, and it's also where most software is developed. Since AI requires mass amounts of data to train models and build applications, businesses have been looking to their cloud providers (like Oracle) to deliver the computing power they need to develop this new technology.
Oracle is absolutely delivering. It has multiple deals with data center semiconductor producer Nvidia, which makes the most powerful chips for AI workloads. In late 2022, the two companies agreed to a deal for tens of thousands of Nvidia's leading A100 and H100 graphics (GPU) chips. As a result, Oracle's new Gen2 Cloud allows customers to scale up to 32,000 GPUs of computing power, which is the highest in the industry -- by comparison, Amazon Web Services' latest EC2 P5 infrastructure can scale to 20,000 GPUs.
Oracle's Gen2 Cloud is now the No. 1 choice for developers of generative AI, with more than 30 new companies signing up in the fourth quarter of fiscal 2023 (ended May 31) alone. Collectively, they committed to buying $2 billion worth of cloud capacity so far.
Oracle generated an all-time high $50 billion in revenue during fiscal 2023, marking an increase of 22% year over year on a constant currency basis. That's an acceleration over its long-run revenue growth rate of 20.5% (going back to its IPO in 1986), which is impressive given the sheer size of the numbers it's delivering now. But I believe Oracle could become a $1 trillion company within the coming decade on the back of the AI revolution, so expect more record-breaking revenue results.
2. CrowdStrike
If there's one industry equally as important as AI in the coming years, it's cybersecurity. The world is more online than ever thanks to cloud computing, which leaves the door open to around-the-clock attacks from malicious actors. Interestingly, leading cybersecurity providers like CrowdStrike (CRWD 2.03%) are actually using AI to fight against the most advanced threats.
CrowdStrike is a leader in endpoint security, which involves protecting any device employees might use to complete their jobs on behalf of the company they work for. This is where 90% of successful cyberattacks originate, because employees have the most touchpoints with external sources whether it be through email, messaging services, or phone calls. As a result, it's precisely where hackers are most likely to strike.
CrowdStrike has 23,000 total customers, and the more that number grows, the more data the company can collect to train its AI models to provide better protection. CrowdStrike ingests over 2 trillion signals per day in the cloud, leading to 180 million indicator of attack (IOA) decisions per second. An IOA reflects a cyberattacker's intent to strike based on digital evidence identified by CrowdStrike's platform.
But CrowdStrike just launched a generative AI tool called Charlotte. Managers can prompt Charlotte to provide specific insights; for example, they can ask what the biggest risks to their networks might be at the present time based on known threats. From there, they can hold a conversation with Charlotte in the same way they would with a chatbot like ChatGPT, to refine its responses. CrowdStrike says it's akin to having a highly intelligent security analyst -- except this one learns at a rapid pace, it never sleeps, and it's available to every customer.
At the end of the fiscal 2024 first quarter (ended April 30), CrowdStrike had $2.7 billion in annual recurring revenue, a number which has grown by 15 times in just the last five years. Still, it's a drop in the bucket compared to what the company believes will be a $158 billion total addressable opportunity for its products specifically by 2026 -- but it gets even better.
Research firm McKinsey & Company says the corporate sector should be spending $2 trillion per year on cybersecurity today, yet it's only spending around $168 billion in total. That's a massive gap that is very likely to be filled over time, because the cost of succumbing to a cyberattack is rapidly rising in both dollar terms and reputational damage.
Investors who hold CrowdStrike stock for the next five years will have a front-row seat as the company tackles a substantial potential growth runway. As a leader in AI-based cybersecurity, it will likely continue to be a go-to platform for organizations seeking the most advanced protection. That will be true no matter what the broader stock market does.
