If you're bullish on artificial intelligence (AI), there are plenty of ways to invest in the opportunities in the tech sector; it's not all about chipmakers. To take advantage of long-term trends in AI, there are other types of stocks that provide exposure to some potentially promising growth opportunities in the years ahead.
Technological research company Gartner identified multiple AI trends that it believes will be prevalent over the next several years. Three stocks that could profit from those trends include Workday (WDAY 1.43%), CrowdStrike (CRWD 0.06%), and SAP (SAP +0.71%). Here's why these could be great AI stocks to buy and hold.
1. Workday
Many workers are concerned that AI could eliminate jobs. And Gartner projects that through 2026, about one-fifth of companies will flatten their organizational structures with the help of AI. Businesses that do this will reduce costs and complexity in their day-to-day operations, giving them plenty of reason to rely on some form of automation in the future.
NASDAQ: WDAY
Key Data Points
One company that stands out as a big winner from this trend is Workday, which provides companies with enterprise cloud applications that can help streamline human resource and finance functions. Workday is using AI to help improve processes and says it can help minimize errors and "modernize finance," which should help businesses operate more efficiently and have more checks and balances built in automatically, reducing at least some need for manual review and oversight.
There are plenty of other possibilities for Workday, and with many businesses already relying on its software to automate and improve their operations, it seems like an obvious choice to benefit from AI. With strong profit margins of around 20%, its earnings could take off along with its top line as it experiences a likely surge in demand in the future.
The tech stock is trading at a reasonable forward price-to-earnings multiple of 29 (based on analyst expectations) and could be a great buy for AI investors.
2. CrowdStrike
A big problem for businesses with AI is that hackers and scammers will also have better tools at their disposal. The need for a top cybersecurity stock to own is evident. And Gartner projects that by 2028, one-quarter of enterprise breaches will be the result of "AI agent abuse." Through the use of AI agents, it'll be easier for malicious actors to deploy both a greater number of attacks, and more sophisticated ones as well.
CrowdStrike uses generative AI to help detect threats and notify companies of breaches more quickly. It claims to have "the industry's most complete AI-native defense."
NASDAQ: CRWD
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The company did face some bad publicity earlier this year due to an outage involving its software that affected businesses all over the world. But CrowdStrike claims that was due to a problematic update, not any breach or hack.
With CrowdStrike being a prominent name in cybersecurity and investing into next-gen technologies to keep its client safe, this can be another good stock to buy and hold. It isn't a cheap stock, as it trades at a forward P/E of more than 70, but the company's bottom line has been improving. As the business continues to scale, that multiple should come down as its margins improve. If you're willing to be patient with the stock, CrowdStrike has the potential to be a big winner due to AI over the long haul.
3. SAP
Trust is undeniably a growing issue when it comes to AI. It's going to be more important than ever to have safeguards in place for governance to protect a company's trade secrets, financial data, and other information. Gartner projects that by 2028, 40% of companies will be using "Guardian Agents" to keep track of and oversee AI agents .
NYSE: SAP
Key Data Points
CrowdStrike can play a role in this, but I think software company SAP can play an even more crucial role here, as it can help determine what these Guardian Agents should be looking for and how they should be evaluating data to ensure proper financial controls are in place. SAP is a trusted name in accounting and finance, and it can help businesses maintain data integrity and comply with necessary protocols and procedures while still being able to rely on AI agents for added efficiency.
SAP's enterprise resource planning solutions can help automate tasks and also put rules into place to ensure that whether it's a human user or an AI agent, tight controls can limit a company's losses and protect its assets. The company trades at a forward P/E of 34, which may seem a bit expensive for a company that grew sales by just 6% last year, but it's arguably justifiable, given the potential the stock possesses in the long run.
