Artificial intelligence (AI) is a hot topic these days. Many companies rely on machine learning and deep data analysis to take their business operations to the next level. Other companies want to supply the needed tools to make a reality out of those AI-powered dreams. The COVID-19 lockdowns have accelerated growth in the industry because AI tools can be helpful in work-from-home and shelter-in-place situations.
The AI market is a game-changing opportunity for the next decade and beyond. You've not missed out on this explosive investment idea, even if this is the first time you're looking at AI stocks. In fact, you're getting in on the ground floor of a market-beating strategy for the long haul. Let me get you started with the three AI-powered companies below.
Image source: Getty Images.
1. DocuSign
DocuSign (DOCU -3.56%) helps businesses manage their business agreements. The company's tools can collect electronic signatures, automate contract negotiations, and store documents in a secure database.
The AI angle on DocuSign's business is found in the machine-controlled contract negotiations and analytics. The company started kicking the tires of this business in 2018 when it started reselling AI-based contract analytics tools from a private company named Seal Software. That relationship escalated into a large investment in 2019, and DocuSign finally bought Seal for $188 million in 2020.
It's still early, and DocuSign expects to incorporate Seal's AI technologies into many aspects of its daily operations. The AI platform allows DocuSign to scan or download contracts in a variety of formats, deconstruct them in search of keywords such as legal terms and financial data, and present options for improving the deal in many ways. This is work that would normally require many hours of lawyer attention and buckets of salesman sweat, but DocuSign has automated the process with Seal's artificial intelligence solutions.
The stock fell as much as 15% on Friday as investors took profits in many high-flying stocks. DocuSign most certainly qualifies for that title. Even after this sharp correction, the stock has more than tripled in 2020 and quintupled over the last 52 weeks.
These shares aren't cheap, but you get what you pay for in DocuSign's splendid revenue growth and a long runway toward continued growth for many years ahead. You should consider buying DocuSign on market dips like this one and be ready to pick up more shares in the next market-wide panic.
2. Aspen Technology
Asset tracking and process management are what Aspen Technology (AZPN) does for a living -- and it does it incredibly well. The company posted modest growth in August's second-quarter report, where analysts had expected the incoming order flow to dry up. You don't shut down Aspen's tools on a whim because many customers have come to see the company's products as absolutely essential to their own operations.
CEO Antonio Pietri said in the earnings call:
By utilizing AspenTech solutions, our customers were able to adapt quickly to unexpected and challenging circumstances. Our customers faced an unprecedented demand disruption in our fiscal fourth quarter and we thank them for their continued trust in the AspenTech team and our products and solutions. We believe this illustrates the mission-critical nature of AspenTech.
Pietri and his management team see AI as a crucial component of nearly every business in the coming years and especially in capital-intensive industries. Aspen's own tools don't feature a whole lot of AI functionality yet, though that's coming, spearheaded by the launch of an AI hub for Internet of Things management in the second quarter. The twist here is that Aspen helps other businesses track and manage their own AI assets.
That's a unique spin on the artificial intelligence market, and one where Aspen doesn't have a whole lot of competition yet. The stock has only gained 7% in 2020 and appears to be poised for huge returns over the next couple of years.
Image source: Getty Images.
3. CrowdStrike
CrowdStrike (CRWD -1.75%) provides AI-based data security tools for a variety of computing platforms. The company hunts down malware and computer viruses, blocks network attacks, and detects unauthorized intrusions in a company's computer systems. CrowdStrike's tools are always searching for new threats with the help of machine learning.
This is the purest application of AI technologies in my roundup. Without machine learning tools, CrowdStrike wouldn't be able to detect new threats, and the security management platform as a whole would be much less powerful -- and more difficult to manage. The company has automated its entire platform to the hilt, which also requires a ton of computerized smarts.
The stock has soared 160% higher in 2020, boosted by three impressive earnings reports. Second-quarter sales nearly doubled, while the bottom line swung to a modest profit, shocking the Street on both counts.
But some investors cashed in their profits after the report and CrowdStrike's stock is trading nearly 20% below its annual highs now. You should consider buying CrowdStrike on the dip and be ready to buy more on the next temporary discount.
