Investing in artificial intelligence (AI) doesn't necessarily mean buying companies directly involved with producing AI models or hardware. Instead, AI investing can also pinpoint companies that do a fantastic job of integrating AI into their products.
Two that I think are best in class at this are UiPath (PATH 0.26%) and CrowdStrike (CRWD 2.03%). I'm also excited about each stock's future, as they look like great buys with a five-year mindset.
1. UiPath
UiPath's software provides its users with robotic process automation (RPA). RPA allows users to automate repetitive tasks like filling out an expense document. However, it also integrates AI into the platform to expand the amount of processes it can automate. Don't know where to start? UiPath has tools that allow you to monitor your business to pinpoint tasks that could be automated.
The market opportunity for RPA is relatively small currently, as it's a technology that is just now being adopted. As a result, Polaris Market Research estimates the RPA market opportunity was about $2.66 billion in 2022. However, they think it will rise to $66 billion by 2032, for a compound annual growth rate (CAGR) of nearly 38%. Considering that UiPath had annual recurring revenue of $1.38 billion (which was up 24% in the third quarter of fiscal year 2024, ended Oct. 31), it already holds a substantial chunk of the RPA opportunity and is capturing more.
This makes UiPath a great investment, as the growth of its product will be noteworthy over the next decade. Fortunately, the stock is also not trading at a massive premium.
PATH PS Ratio data by YCharts
Although the stock has drastically risen in value over the past few months, it's just the start of something bigger. With a massive opportunity in front of it, UiPath makes a fantastic buy for 2024 and beyond.
2. CrowdStrike
CrowdStrike is a cybersecurity leader and has worked to integrate AI from day one. CrowdStrike's primary product is endpoint protection, which protects network access points like laptops or cellphones. Its AI-powered model can detect what normal activity from a device is and what is a threat. After it makes that determination, it shuts down the attack without human intervention.
In addition to its endpoint protection software, it has more than 20 other offerings. After an initial sign-on, customers expand their spending by adding new modules. In fact, 63% of customers use five or more products, while 26% use at least seven.
Additionally, the market opportunity CrowdStrike estimates it operates in is massive. For 2024, it estimated the total market opportunity is $100 billion, but it will expand to $225 billion through new product launches and existing segment growth.
With CrowdStrike still rapidly growing (its annual recurring revenue rose 35% to $3.15 billion in Q3 of fiscal year 2024, ended Oct. 31), it makes for a great investment over the coming years.
One note of caution: CrowdStrike's stock is highly valued at nearly 22 times sales. This is a premium price tag, but CrowdStrike can justify it through flawless quarterly reports.
Although this isn't a go-all-in price point on the stock, I'm confident that CrowdStrike will continue to grow steadily and be a market-beating investment over the next five years.
