Many tech stocks are flying high these days on digital wings of artificial intelligence (AI). But the rising tide is not lifting every machine-powered boat that deserves a boost. In particular, I think the market will come to its senses and see how machine learning will benefit The Trade Desk (TTD 0.25%) and Atlassian (TEAM 7.13%) in the long run. They just haven't stated their AI case yet, leaving the stocks undervalued in the context of fantastic long-term business prospects.

The entertainment future is full of AI-powered ads

As a service provider in the digital advertising space, The Trade Desk is wading through an industrywide downturn. That makes a ton of sense, of course. When people are clutching their purse strings tightly during an inflation-driven economic crisis, it stands to reason that ad buyers will slow down their marketing campaigns. Why spend big bucks on video ads online and in video-streaming services if no one is ready to buy stuff?

The turnaround is already underway. The Trade Desk's stock has gained 66% in 2023. There is less pressure from the government's anti-inflation moves now, and The Trade Desk is getting a little bit of help from the ongoing AI frenzy. The company never slammed the brakes on real-world revenue growth, either. The slowest year-over-year revenue growth since the inflation panic started clocked in at 21.4%. Lots of high-octane growth stocks would sell their own running shoes for that kind of growth -- in a healthy market.

And that's not all. There is light at the end of the digital advertising tunnel, and that's not an oncoming train. Instead, I see ad sales coming back strong as the economy gets over the inflation flu. There should even be a temporary rush of overcompensation for the recent run of hard times. Businesses never stopped developing new and improved products and services, leaving them with a backlog of marketing needs. The Trade Desk is ready to help these delayed ad campaigns find the right display channels at the right price.

The Trade Desk has new services on tap, too. The company built ad campaigns around machine learning systems years before it was cool. The Koa AI platform helps clients analyze their target audiences and set up appropriate ad-buying campaigns.

And it's hard to match the scale of The Trade Desk's market analytics. Koa has access to more than 600 billion end-user interactions every day. "AI is only as intelligent as the data it's built on," The Trade Desk's own marketing slogans often trumpet. The takeaway is simple -- the data analysis from this company is next-level sophistication in a nutshell. The future growth is AI-powered and nigh-on unstoppable.

But despite the impressive market position and solid year-to-date price increase, The Trade Desk's stock still looks cheap. Shares are changing hands at a 35% discount from the all-time peak prices of 2021. This AI stock is primed for a bull run over the next couple of years.

Using AI as a carrot for cloud migration

Then there's Atlassian, the Australia-based business behind the collaboration and project management tools Jira, Trello, and Confluence. This company is adding AI features to its cloud-based tools for all the usual reasons -- improving the user experience, giving people easy access to the right information in a massive data collection, and running powerful analytics on said data to generate helpful insights about your projects.

However, Atlassian is also leaning into cloud-based AI tools from OpenAI for a more unusual reason. The company has been converting old-school software license clients into cloud service subscribers for years now, and the AI surge provides a unique push to get the last stragglers over that conversion hill.

OpenAI's GPT engine powers ChatGPT but is also available as a separate generative AI system for business use. Atlassian has added generative AI features to most of its products, but only for the cloud-based versions. After all, OpenAI's tools are also cloud-based and require internet access, so why shouldn't Atlassian ask its clients to go all-in on the cloud platform if they want the full experience of integrated analytics and chatbots?

"All these new products that we're delivering and shipping -- they're only available on the cloud. So I think customers recognize the direction that we're shifting toward and where we think the best customer experience will be," investor relations chief Martin Lam said at a recent investor conference. "Customers are recognizing that as well, as they evaluate their migration plans and say, 'Okay, hey, I want access to generative AI capabilities. I really need to think about my cloud migration plans.'"

So the inherently cloud-based AI features are serving as "a pretty big carrot" that should inspire Atlassian's last non-cloud customers to make the leap into software-as-a-service subscriptions. That's a clever move, boosting the subscriber counts for a more profitable revenue stream.

And we haven't even talked about Atlassian's stock price yet. The stock has gained 43% year-to-date but still sits 61% below (all together now) the peak price from the fall of 2021. This stock isn't cheap in terms of valuation metrics but Atlassian is a fast-growing cash machine. It is another rock-solid AI investment in my book, especially at these relatively modest share prices.

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