Many investors are attempting to find top artificial intelligence (AI) stocks. The opportunity is too great to ignore this technological shift, and all types of investors should have some exposure. Although some of the big tech companies have a component of AI in them, they aren't nearly as focused as some other investments.
One company that concentrated on AI and how it can improve its products is CrowdStrike (CRWD 0.13%). This top-notch cybersecurity company used AI before it became mainstream, so it isn't just a buzzword that management deployed to gain attention. I recently purchased more shares of CrowdStrike, and if it continues executing like it has been, I'll be ready to purchase even more.
CrowdStrike has a large product offering
CrowdStrike specializes in protecting network endpoints, whether those are cloud workloads, smartphones, or laptops. By thwarting threats at those vulnerable points, CrowdStrike can prevent breaches. It does this by analyzing trillions of signals weekly to determine what is normal operating activity and what may be a threat. If it identifies a threat, CrowdStrike can quickly shut access to the network down at that particular device to prevent further damage.
This segment of AI is known as machine learning. Machine learning relies on constant data streams to update a program with new information. By continuously evolving the software, CrowdStrike's platform stays current on the latest threats and doesn't need to release periodic patches to protect users from the latest threats.
NASDAQ: CRWD
Key Data Points
Its core product gets customers in the door, but CrowdStrike offers much more. Through different products, which it calls modules, clients can enhance their cyberdefenses with threat hunting, vulnerability management, device control, or malware search. With 63% of its customers utilizing at least five or more modules, a significant portion of its client base choose to expand beyond the base functionality of CrowdStrike's software.
With the threat of cyberattacks constantly growing, cybersecurity spending will only increase. This bodes well for companies like CrowdStrike. Management projects its total addressable market will expand from $76 billion today to $158 billion by 2026.
CrowdStrike's future is bright, but why is it a great buy now?
CrowdStrike is finally becoming profitable
Like many software companies, CrowdStrike hasn't been immune to the broader slowdown in enterprise software spending. However, in its fiscal Q2 2024, which ended July 31, it still managed to grow its annual recurring revenue by 37% to $2.93 billion.
Furthermore, CrowdStrike has started breaking even on a GAAP (generally accepted accounting principles) basis. Although it lost $15 million from operations, interest income from the cash on its balance sheet offset these losses and allowed CrowdStrike to post an $8.5 million profit. While some may gripe about how this profit occurred or its relatively small amount, it shows CrowdStrike's management is serious about making the company consistently profitable, something many other software companies haven't accomplished yet.
The only drawback with CrowdStrike's stock is its high price tag. CrowdStrike's stock trades at a hefty premium.
CRWD PS Ratio data by YCharts.
However, it trades that way because of its potential. CrowdStrike's market opportunity is massive, and the company already has a strong history of launching new products and getting customers to adopt them. With the business starting to become profitable and revenue continuing to rise at an impressive rate, I think CrowdStrike is one of the top stocks to buy today, even if the stock is up 25% over the past three months.
Although it would have been better to get the stock for cheaper, the long-term opportunity here is too large to let a short-term price movement dictate an investor's actions.
