whether right or wrong, Nvidia Artificial intelligence (AI) has become the face of Wall Street. This is not a fluke; Nvidia's growth has exploded since early last year, and the stock's gains have made it a household name among investors.
Still, it's worth pointing out that AI goes far beyond a company. You can buy and hold stocks like Nvidia, but don't rule out the potential upside of some smaller companies that have the ingredients to become big winners down the road.
Here are three AI stocks you can add to your long-term portfolio:
1. Palantir Technologies
Data is the foundation of how AI works, so it makes sense that companies that make the best use of their data can have a competitive advantage. It has a fast and dirty pitch for it. Palantir Technologies (NYSE: PLTR ).
The company builds custom software applications on its platforms – Foundry, Gotham, and AIP – that help organizations analyze their data in real time. Palantir works closely with the US government, its allies, and the private sector, where expansion is accelerating.
AIP, or its artificial intelligence platform, has unlocked a new level of growth and could be the long-term catalyst that makes Palantir one of the world's biggest businesses in the coming decades. AIP helps government and enterprises develop and deploy AI applications.
The value of AIP is evident throughout Palantir. Business customer growth accelerated to 69% year-over-year in the first quarter, driven primarily by interest in AIP.
Palantir is growing and profitable, with a balance sheet of $3.9 billion in cash and zero debt. Analysts expect the company's revenue to grow at an annual rate of 27 percent over the next three to five years.
The company still has just 262 commercial customers in the U.S. That number could grow long-term if it continues to demonstrate the value of its AI technology to businesses.
2. Snowflake
An organization's data isn't just sitting there, ready to go. Companies must store it securely, which creates huge opportunities for it. Snowflake (NYSE: SNOW).
The company is a cloud-based data storage and analytics platform that can make it easy for customers to store their data and access it whenever they want. Just think of the different data formats and sources. Citing data quickly becomes a matter of finding a needle in a haystack. That's where Snowflake helps.
Snowflake has a usage-based billing model that enables customers to scale their product to their needs. And because data grows exponentially, companies must scale Snowflake usage as their data expands. As proof, the business has a strong net income retention rate of 128%.
At the same time, expanding organic revenue is an opportunity to add new clients. Snowflake has approximately 9,822 customers today, and a tremendous long-term runway, with 1.7 million C-corporations in the U.S. alone. Overall, it looks like it will enjoy several years of double-digit growth.
3. Crowd Strike Holdings
Cybersecurity is increasingly at the forefront of many businesses' priorities. Protecting data and digital assets is no longer optional because the potential costs of failure are so high — the average breach causes millions of dollars in damages.
So companies are looking to next-generation security providers. Crowd Strike Holdings (NASDAQ: CRWD ). The company operates a cloud-based platform that secures endpoints, cloud workloads, identities and data. The platform adapts to real-time threats, making it more effective than older technologies like antivirus protections.
The proof of how good CrowdStrike is is in its impressive financial metrics. Annual revenue has grown more than sevenfold over the past five years to $3 billion.
The company is also very profitable. CrowdStrike is turning 32% of its revenue into free cash flow, bolstering a solid balance sheet with $3.5 billion in cash versus $742 million in debt. Analysts believe that its earnings will grow by 22% annually for the next three to five years.
The company has become known for expanding through new product modules. Its addressable market is worth $100 billion today and could expand to $225 billion by the end of the decade. This is a tremendous opportunity for a business with just over $3 billion in sales today.
Investors should consider buying shares gradually because strong fundamentals have earned the stock a high valuation at 79 times earnings, which is expensive — even for a company of CrowdStrike's caliber.
Should you invest $1,000 in Palantir Technologies right now?
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Justin Pope has no positions in any stocks. The Motley Fool has positions in and recommends CrowdStrike, Nvidia, Palantir Technologies, and Snowflake. The Motley Fool has a Disclosure Policy.
Diversify Beyond Nvidia: 3 Artificial Intelligence (AI) Stocks to Add to Your Portfolio was originally published by The Motley Fool.