3 AI-Exposed Stocks to Grab Before Wall Street Catches On
The artificial intelligence rally has carried into 2024 after a strong showing in 2023. Many corporations have rushed to launch AI initiatives, and any mention of the technology can send a stock soaring.
While some stocks deeply ingrained with the technology have taken off, there are a few under-the-radar stocks also poised to benefit from artificial intelligence. AI doesn’t make up the entirety of these firms’ business models. However, innovations in technology can help these assets appreciate over time.
Investors looking for new opportunities in the industry may want to consider these AI-exposed stocks.
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Sterling Infrastructure (STRL)
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The construction company operates in growing markets like the southeast, southwest, and Rocky Mountains states. Sterling Infrastructure (NASDAQ:STRL) has a healthy mix of recurring revenue and sales from new clients. Margins continue to improve which can make the P/E ratio more attractive than it already is.
STRL specializes in e-infrastructure solutions like data centers and e-commerce warehouses. The company is riding off the tailwinds of its clients and looks poised to generate more gains. As demand for AI grows, STRL stands to attract more clients seeking data centers.
Shares of the Houston-based company trade at a 17 forward P/E ratio and a 0.87 PEG ratio. Rising diluted EPS and elevated guidance suggest the valuation can get more enticing. Sterling Infrastructure raised its diluted EPS guidance from $4.00 to $4.20 to $4.10 to $4.23 for the fourth quarter.
Also, the construction company recently announced a $200 million stock repurchase program that will take place over the next 24 months. This initiative will reward shareholders and demonstrate a strong business model. The $200 million stock repurchase program is almost 10% of the stock’s market cap. STRL is currently valued at $2.5 billion.
Duolingo (DUOL)
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Duolingo (NASDAQ:DUOL) is an educational app that helps people learn new languages and subjects. The company isn’t the first one many investors would think of in artificial intelligence. However, Duolingo uses AI to create customized learning experiences for its users.
The company’s attention to detail has resulted in meaningful growth in active users. Monthly active users increased by 47% year over year (YOY) in Q3 2023, while daily active users soared by 63% YOY.
The firm has always posted solid revenue growth and continued the trend with a 49% YOY growth rate in the third quarter. However, the company’s profitability is an exciting development. Duolingo reported $2.8 million in net income compared to a $18.4 million net loss in the same period last year.
Duolingo is still a relatively small company with a $7.5 billion market cap. The stock is enduring a sharp correction due to a lofty valuation but the long-term outlook remains strong due to rapidly growing revenue, earnings, and active users.
Cloudflare (NET)
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Artificial intelligence will increase the online presence of many corporations. The technology will also enable new innovations like the metaverse. There’s a lot of excitement about the technology, but artificial intelligence can create more vulnerabilities in a company’s online presence.
Furthermore, cyber attackers have been using artificial intelligence to ramp up their attacks. Dark web resources like FraudGPT and WormGPT make it easier for hackers to infiltrate databases.
The rise of cyberattacks can help stocks like Cloudflare (NYSE:NET) outperform the market, which is exactly what it’s done over a lengthy stretch. Shares are up by 56% over the past year and have gained 437% over the past five years. The company’s latest financial results sparked another rally and indicated the asset can continue to appreciate.
During the fourth quarter of 2023, Cloudflare grew its revenue by 32% YOY. Also, it signed its largest customer and reached an agreement for its largest renewal contract with another customer. Businesses are rushing to protect themselves from cyberattacks.
Therefore, Cloudflare is a logical choice that has approximately 190,000 paying customers. As hackers use AI tools to attack more businesses, Cloudflare stands to gain market share.
On the date of publication, Marc Guberti did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.
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