3 best artificial intelligence stocks to buy in August
Artificial intelligence systems have become an essential ingredient in the recipe for the growth of the tech sector, with applications helping to increase the capabilities of everything from search engines to autonomous vehicles.
Investors looking to cash in on the ever-growing use of AI might want to take a close look at companies like Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), Palo Alto Networks (NYSE: PANW), and Qualcomm (NASDAQ: QCOM). These three actions have connections to AI and are well placed to benefit from it.
Perhaps no company brings a greater daily presence to AI than Alphabet, parent company of Google. Its use of AI goes far beyond its Google Home devices and apps, not to mention its AI-powered Google search engine. The owner of YouTube and the Android operating system has made it his mission to organize information to make it “universally accessible and useful.” AI helps him do that.
Alphabet’s various companies are also using technology to develop tools for socially positive purposes such as tracking disease and helping people with disabilities. Another emphasis is on machine learning, that is, creating systems that process data and find patterns without deriving programming rules, a practice that in essence “trains” algorithms.
This AI feature entering and exiting Alphabet’s various business segments likely played a significant role in helping Alphabet generate $ 117.2 billion in revenue for the first six months of 2021. That total was an increase by 47% during the first two quarters of 2020. Net revenues increased 164% during this period to reach $ 36.5 billion. Expenses grew at a slower pace than income, and Alphabet earned about $ 7.5 billion from non-core sources such as a net unrealized gain on equity securities.
The share price has now risen by over 80% in the past 12 months. In addition, thanks to the increase in profits, the company’s P / E ratio fell to 29, slightly lower over this period. This likely means that even with the more subdued ‘tailwind’ forecast in the Q2 2021 earnings call for the current quarter, Alphabet remains positioned for long-term AI-driven growth.
2. Palo Alto Networks
Like Alphabet, multinational cybersecurity firm Palo Alto Networks has built a platform that includes advanced firewalls and cloud-based offerings to expand these firewalls to cover other aspects of security, all with the important help of AI. The nature of what business does requires it to protect an ever-changing number of devices connecting and disconnecting with networks from a variety of locations.
Its security relies in part on AI to predict future threats and act quickly when it cannot prevent attacks but must minimize the damage caused. Palo Alto also uses machine learning throughout this process to learn how to block similar types of attacks in the future and predict when incursions might occur.
The effectiveness of these AI-powered cybersecurity efforts is playing its part in increasing sales for Palo Alto. In the first nine months of its 2021 fiscal year, the company’s revenue jumped 24% year-on-year to just over $ 3 billion. But AI’s efforts also affected results, as expenses increased in proportion to income, as did interest expense on its debt. The company’s net loss for the period was $ 380 million, up from $ 208 million in the first nine months of fiscal 2020.
However, these net losses were mainly due to acquisitions and non-cash charges. On a non-GAAP basis, Palo Alto achieved net income of $ 452 million in the first nine months of its 2021 fiscal year. In addition, the company raised its outlook for the year, forecasting a revenue of business of approximately $ 4.2 billion. That would be 23% more than its total for fiscal 2020.
This may help explain why Palo Alto’s stock price has risen 55% this year. Its price / sale ratio is around 10, which makes it a good deal compared to its main competitor. Zscaler, but more expensive than another competitor, Cisco Systems. Nonetheless, its sales multiple remains close to the historical company average, and as security becomes more critical in this increasingly cloud-dependent world, AI should help drive growth and success. Safe stock returns for Palo Alto.
Qualcomm is best known for smartphone chipsets, so investors may not think of it as an AI game. However, it has put more emphasis on the ubiquity of AI as it seeks to develop and apply AI on the device and AI in the edge cloud on its 5G enabled devices.
Through these innovations, Qualcomm’s hardware delivers benefits such as extended battery life, improved connectivity, higher quality photos, and more robust security. Qualcomm’s products also apply AI to autonomous driving systems, factory production, and a range of Internet of Things applications.
Without a doubt, AI has helped Qualcomm generate $ 24.2 billion in revenue in the first nine months of fiscal 2021, a 60% year-over-year increase. During that period, net income jumped 179% to $ 6.2 billion. Operating expenses have not grown as fast as income, and that figure includes $ 523 million in income, mostly attributable to investment gains.
The company only offered a forecast for the fiscal fourth quarter, and the outlook suggests a slowdown is imminent. Fourth-quarter revenue forecast in the range of $ 8.4 billion to $ 9.2 billion would be only a modest increase from the $ 8.3 billion in fiscal fourth quarter revenue 2020.
Still, investors like what they see, and Qualcomm’s share price has risen 40% in the past 12 months. Plus, its P / E ratio of 18 makes it a good deal considering recent earnings growth. Even if revenue growth slows for a while, this tech stock looks like an AI-powered boon that could still bring long-term gains to shareholders.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.