Companies in many different sectors are starting to utilize the power of artificial intelligence, Citi (NYSE:C) recently reported. For example, Coca-Cola (NYSE:KO) and the London Stock Exchange are both extensively incorporating technology into their businesses. This has led to the rise of AI stocks to buy.
And in the fintech space, Visa (NYSE:V), Mastercard (NYSE:MA), and Charles Schwab (NYSE:SCHW) are all using AI as well. Finally, Walmart (NYSE:WMT) and General Motors (NYSE:GM) are widely exploiting the technology. Citi’s work validates my long-held thesis which postulates that AI will greatly improve the businesses of many if not most firms in a wide variety of sectors.
As a result, the financial results of the companies that utilize the technology relatively early in the AI revolution will likely explode higher, while the top and bottom lines of the firms that market the best AI-enabled solutions will, of course, get tremendous boosts. Having said that, here are three AI stocks to buy that will greatly reward investors down the road.
ServiceNow (NOW)
A leader when it comes to selling software that automates IT tasks, ServiceNow (NYSE:NOW) on July 26 unveiled a very promising AI initiative and reported impressive second-quarter results.
In partnership with Nvidia (NASDAQ:NVDA) and Accenture (NYSE:ACN), NOW announced AI Lighthouse, “a..program designed to fast-track the development and adoption of enterprise generative AI capabilities.” The venture will help firms use AI to improve their businesses. The alliances should enable NOW to both significantly improve the AI tools that it launched this year and gain exposure to many potential customers for both its new AI products and its other offerings.
NOW’s Q2 sales jumped 23% year-over-year to $2.15 billion, while its income from operations, exceeding certain items, soared 25% YOY to $544 million. This makes it one of those AI stocks to buy.
IBM (IBM)
IBM (NYSE:IBM) recently announced that it had launched Watson X, which Barron’s describes as a “new software platform for building enterprise AI models and applications. ”
Lisa Ellis, an analyst at investment bank MoffettNathanson, is optimistic about the offering. According to Ellis, “Watson X could be “a new blockbuster for IBM,”
And the system is off to a great start as, just ten days after being launched, it has already been adopted by over 150 organizations. Among its initial users are Citi, NASA, and Samsung. The product looks poised to be a real game changer and needle mover for IBM and IBM stock.
Trading with a low forward price-earnings ratio of just 14.85, IBM stock does not come close to reflecting the company’s huge opportunity in AI, not to mention its rapidly expanding hybrid cloud business.
Lemonade (LMND)
Lemonade (NYSE:LMND) is a leader when it comes to utilizing AI to improve its business and make itself more attractive to consumers. As I noted in a June column, the company “extensively utilizes AI to price its offerings and interact with its customers.”
Moreover, the company has reported that AI will meaningfully lower its expenses.
And in recent weeks, Wall Street appears to have started to realize the company’s vast potential, as LMND stock has jumped 33% in the last month and 112% in the previous three months.
Meanwhile, other analysts are now also enthusiastic about the name. For example, Seeking Alpha columnist Wealth Insights recently wrote that the company has “strong..fundamentals” and is poised to deliver “rapid growth,” making its current valuation “attractive.”
Also bullish was another Seeking Alpha commentator, Dilantha De Silva. The columnist noted that LMND is using “cutting-edge technology to streamline processes and improve customer experiences.”
Reporting that the company’s “gross earned premium and gross profit increased by over 60%” year-over-year in the first quarter, DeSilva believes that LMND is on a “positive trajectory.”
In other signs that investors are warming up to LMND, the shares have a very high Relative Strength score of 96, while Investor’s Business Daily gives the name an Accumulation/Distribution score of B+, indicating that large investors have been snapping up LMND stock fairly quickly in the last 13 weeks.
As of the date of publication, Larry Ramer’s wife owned shares of NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
