Machine learning (ML) is a branch of artificial intelligence (AI) that enables computers to learn from data and experience without explicit programming. The potential of generative AI has made machine learning stocks among the hottest investments in 2023. The technology has numerous applications in various industries, including cloud computing, cybersecurity and online search and discovery.
Volatility from both macroeconomic machinations and an on-going earnings season have rocked the valuations of certain companies, thus creating opportunities for long-term investors. While machine learning is still developing use-cases, the technology will be inculcated into a variety of applications in the future. The companies below will definitely play respective roles in that industry shift.
CrowdStrike
CrowdStrike (NASDAQ:CRWD) is a cybersecurity company that leverages machine learning to protect customers from online threats. CrowdStrike’s cloud-native platform, Falcon, provides endpoint protection, threat intelligence, and incident response services. Falcon uses artificial intelligence to detect and prevent attacks in real time, without relying on signatures or updates.
CrowdStrike has been benefiting from the increased demand for cybersecurity solutions amid the rise of remote work, digital transformation, and cyberattacks. Last year, a research report by IDC found CrowdStrike had taken 17.7% of $8.8 billion Modern Endpoint Security market, which was higher than Microsoft’s 16.4%. In essence, endpoint security guards against malicious activities and campaigns on endpoints, or entry points, of end-user devices like desktops, laptops, and mobile devices. CrowdStrike’s position in the Endpoint Security market is emblematic of the success of its cloud-native solutions.
Further, the company’s success has largely translated into a positive 2023 for CrowdStrike. In the first quarter for their fiscal-year 2024 (ended April 30), the cybersecurity firm generated positive net income for the first time. Profitability was achieved despite a difficult selling environment which caused sales growth to slow relative to the same period in 2022. Ultimately, CrowdStrike will probably continue to dominate in its respective market despite short-term headwinds. Investors looking for exposure to a cybersecurity business whose products are undergirded by innovative machine learning models should give CrowdStrike a look.
Palantir Technologies (PLTR)
I have discussed Palantir in a written piece in July, and after the company reported earnings at the beginning of this month, I think it is worthwhile giving the company another entry. Over the years, Palantir Technologies (NYSE:PLTR) has evolved from primarily building software for the United States intelligence community to creating powerful data analytics tools for both enterprises and government agencies. Specializing in AI and ML, Palantir helps these businesses and agencies unlock insights from their data. Palantir’s platforms, Foundry and Gotham, leverage AI and ML to enable data integration, analysis, and visualization. Further, their Apollo platform allows for the rapid deployment of software and updates.
This year has been sort of a mixed bag of earnings results for the data analytics firm. In Q1 2023, Palantir beat earnings estimates with total revenue growing by 18% YoY and GAAP net income coming in positive for a second consecutive quarter, driven by strong growth in its commercial and government segments. However, in the second quarter, Palantir slightly missed EPS estimates while still remaining profitable. Moreover, CEO Alex Karp noted the company was struggling to see new opportunities in continental Europe. Shares plummeted 11% after that earnings release, but Palantir’s continued profitability despite difficulties on revenue growth exemplifies its resilience.
PLTR’s shares were up 211% year-to-date before the earnings print, but are now only up 128%. Investors interested in machine learning and big data should definitely take notice.
Autodesk (ADSK)
Engineering students are probably familiar with this entry. Autodesk (NASDAQ:ADSK), well-known for developing useful tools, such as AutoCAD, Revit, and Inventor for design, engineering, construction, and manufacturing industries, has made meaningful inroads into machine learning. In particular, Autodesk has been investing heavily in machine learning to enhance its software capabilities and differentiate itself from its competitors. For example, Autodesk uses machine learning and generative AI to enable “generative design,” which is a process that automatically generates optimal design solutions based on user-defined criteria and constraints.
A few years prior, Autodesk had broadly benefitted from the shift to cloud-based subscription models from a license-based business model. For a while, this grand shift eventually breathed life into what used to be inconsistent annual revenue growth. However, some investors are beginning to question whether or not that fountain of revitalized growth has dried up. Autodesk’s fiscal 2023 year-end results, which ended on January 31, exhibited strong financial performance which beat Wall Street estimates, but management announced weaker guidance for the new fiscal year, which triggered a broad sell-off.
In my opinion, I believe it is unfair to think growth opportunities for Autodesk have potentially dried up, especially given the macroeconomic environment has made selling in the near-term difficult for a number of businesses. For the first quarter of fiscal year 2024 (ended on April 30), Autodesk surpassed Wall Street estimates again due to strong subscription revenue growth. The company’s foray into ML and AI through generative design could eventually help bring top-line growth to new heights.
On the date of publication, Tyrik Torres 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.
