Artificial intelligence (AI) has become a well-known term in recent years, though it has been present for decades. The emergence and popularity of generative AI tools such as ChatGPT and Google’s Gemini have significantly contributed to bringing AI into the mainstream. Companies, particularly in the technology sector, are eager to incorporate AI into their products and services, yet not all will implement or profit from AI advancements equally. Two companies, however, stand out in this context.
For those with $3,000 in discretionary funds looking to invest in AI stocks, two leading companies demonstrate the transformative potential of AI in distinct ways. A $1,500 investment in each company could provide exposure to their innovative uses of AI.
1. Alphabet
Alphabet, represented by the stock symbols GOOG and GOOGL, is a pivotal player in AI due to its substantial research and infrastructure contributions. Its subsidiary, DeepMind, is a key contributor to significant AI developments, despite not being as widely recognized as Google and YouTube.
Google Search, a cornerstone of Alphabet’s revenue, raised some concerns about the impact of introducing AI Overview. While Google generates income from ad clicks, AI Overview could answer queries typically requiring webpage visits. Nevertheless, in the fourth quarter of 2024, Google Search earned $54 billion, marking a 13% year-over-year increase, which constituted 56% of Alphabet’s total revenue. Despite fears of potentially disrupting its business model, the advantages of AI for Alphabet are expected to outweigh any potential drawbacks.
Alphabet’s approach to AI involves handling research, infrastructure, AI training, and app development internally, contrasting with other tech giants that rely heavily on third parties. This vertical integration offers Alphabet more flexibility and control.
Moreover, Google Cloud, a major Alphabet business, is poised to gain from AI. As the third-largest cloud service provider globally, it is well-positioned to capitalize on the expanding cloud services market.
Alphabet’s stock, having declined by over 11% as of March 24, remains an attractive long-term investment.
2. CrowdStrike
In the realm of business cybersecurity, CrowdStrike is a leading figure. As the pioneer of AI-native cybersecurity solutions, CrowdStrike introduced its Falcon platform in 2011, deviating from traditional on-premises products and adopting a cloud and AI-focused approach.
Despite facing challenges following a significant IT outage in July 2024, CrowdStrike’s core cybersecurity products have drawn tens of thousands of customers, becoming the preferred cloud security platform for over 60% of the Fortune 100.
CrowdStrike’s financial growth is notable, with its annual recurring revenue rising by 23% year-over-year to $4.24 billion, accompanied by $1.07 billion in free cash flow. This reflects the effectiveness of its subscription-based model, which allows clients to select specific solutions like identity, endpoint, and cloud protection.
The company’s total addressable market for AI-native solutions stands at approximately $116 billion, with expectations to expand to $250 billion by 2029, indicating a compound annual growth rate of over 20%.
CrowdStrike benefits from a first-mover advantage in AI and cybersecurity, having accumulated relevant data over a longer period than its competitors. As a critical sector, cybersecurity—including CrowdStrike—is expected to remain crucial, presenting a compelling long-term investment opportunity.
