Whether right or wrong, Nvidia has become the face of artificial intelligence (AI) on Wall Street. It's not a fluke; Nvidia's growth exploded since early last year, and the stock's gains have made it a household name among investors.
Still, it's worth pointing out that AI goes far beyond one company. You can buy and hold a stock like Nvidia, but don't dismiss the potential upside of some smaller companies that have the ingredients to become big winners down the road.
Here are three AI stocks you can add to your long-term portfolio:
1. Palantir Technologies
Data is arguably the foundation of how AI works, so it would make sense that companies that best use their data might have a competitive advantage. That's the quick and dirty pitch for Palantir Technologies (PLTR +1.17%).
The company builds custom software applications on its platforms -- Foundry, Gotham, and AIP -- that help organizations analyze their data in real time. Palantir works closely with the U.S. government, its allies, and the private sector, where expansion is happening quickly.
AIP, or its Artificial Intelligence Platform, unlocked a new level of growth and could be the long-term catalyst that makes Palantir one of the world's largest businesses over the coming decades. AIP helps develop and deploy AI applications for government and businesses.
The value of AIP is evident throughout Palantir. Growth in commercial customers has accelerated to 69% year over year in the first quarter, mainly due to interest in AIP.
NASDAQ: PLTR
Key Data Points
Palantir is growing and profitable, with a balance sheet of $3.9 billion in cash and zero debt. Analysts believe the company's earnings will grow at an annualized rate of 27% over the next three to five years.
The company still has just 262 commercial customers in the U.S. That figure could grow for a long time if it continues to show the value of its AI technology for businesses.
2. Snowflake
An organization's data isn't just sitting there, ready to go. Companies must securely store it, which creates a massive opportunity for Snowflake (SNOW 2.46%).
The company is a cloud-based data storage and analytics platform that can make it easy for customers to store their data and access it whenever they choose. Just think of data's various formats and sources; referencing data quickly becomes a matter of finding the needle in the haystack. That's where Snowflake helps.
NYSE: SNOW
Key Data Points
Snowflake has a usage-based billing model that enables customers to scale its products to their needs. And since data grows exponentially, companies should increase their use of Snowflake as their data expands. As proof, the business has a robust net revenue retention rate of 128%.
Along with that organic revenue expansion is the opportunity to add new clients. Snowflake has roughly 9,822 customers today, and with 1.7 million C-corporations in the U.S. alone, there's a tremendous long-term runway. In all, it seems likely to enjoy many years of double-digit growth.
3. CrowdStrike Holdings
Cybersecurity steadily moved toward the forefront of many businesses' priorities. Protecting data and digital assets is no longer optional because the potential costs of failing are too high -- the average breach causes millions of dollars in damages.
So companies are looking to next-generation security providers like CrowdStrike Holdings (CRWD 4.01%). The company operates a cloud-based platform that secures end points, cloud workloads, identities, and data. The platform adapts to real-time threats, making it far more effective than outdated technologies like antivirus protections.
NASDAQ: CRWD
Key Data Points
The proof of how good CrowdStrike is lies in its stellar financial metrics. Annual revenue multiplied more than sevenfold over the past five years to $3 billion.
The company is also very profitable. CrowdStrike is converting 32% of its revenue to free cash flow, reinforcing a solid balance sheet that has $3.5 billion in cash versus $742 million in debt. Analysts believe it will grow earnings by 22% annually for the next three to five years.
The company has become famous for expanding via new product modules. Its addressable market is worth $100 billion today and could expand to $225 billion by the decade's end. That's a tremendous opportunity for a business doing just over $3 billion in sales today.
Investors should consider buying shares slowly because strong fundamentals have earned the stock a lofty valuation at 79 times earnings, which is expensive -- even for a company of CrowdStrike's caliber.
