So far only a few software stocks have benefited tremendously from the AI revolution, including Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). But, according to Investor’s Business Daily, it’s widely believed that most AI software stocks will not monetize AI in a material way until late 2024 or 2025. That’s partly because AI has become much more multi-faceted in recent years, and companies are just starting to utilize the technology’s new capabilities.
Specifically, AI has gone from only being able to analyze data to also analyzing word patterns. Moreover, the technology can now autonomously create text, images, video and computer programming code. And speaking of autonomous, self-driving vehicles have become significantly safer and more advanced thanks to improvements in AI. Given these points, it’s unsurprising that well respected tech research firm Gartner expects global spending on AI software to surge from $124 billion in 2022 to $297 billion in 2027. For investors who want to exploit these trends, here are three AI software stocks to buy.
SAP (SAP)
European enterprise software giant SAP (NYSE:SAP) continues to enhance and expand its AI-oriented partnerships with the biggest names in the AI sector. Given the tremendous capabilities of SAP’s allies, I believe that these initiatives will greatly boost SAP stock.
On March 18, the company disclosed that it was expanding its alliance with Nvidia (NASDAQ:NVDA). Under the deal, the chip maker will help SAP enhance the AI capabilities of its Joule assistant and of its other applications. Additionally, the firms will collaborate to assist SAP’s customers with utilizing AI. Specifically, SAP will employ Nvidia’s technology to tailor its AI to enterprises’ specific needs.
SAP has also teamed up with another AI giant, Microsoft, by integrating MSFT’s AI tools into its human resources software, SuccessFactors.
Meanwhile, well-known investor Sequoia Capital notes that the revenue of SAP’s cloud enterprise resource planning offering jumped 70% last year. And it predicts that the firm’s sales will grow by high single digit percentage levels in 2024. What’s more, the investor believes that the company’s profit margin can increase in the long-term.
Symbotic (SYM)
Symbotic (NASDAQ:SYM) provides industrial robots that are autonomous and powered by its proprietary AI software. Its robots are primarily used in warehouses, making the firm well-positioned to benefit from the continued, significant growth of e-commerce.
Among the impressive names on its list of customers are Walmart (NYSE:WMT), FedEx (NYSE:FDX) and Target (NYSE:TGT).
Also noteworthy is that, in a note to investors, investment bank Northland Securities hiked its target on the shares to $60, nearly 50% above SYM’s current valuation. The bank noted that, last quarter Symbotic’s deployment of its robots had reached record levels. And, Northland thinks that the company’s revenue will continue increasing by over 50% year-over-year.
Workday (WDAY)
One of the leading providers of human resources software, Workday (NASDAQ:WDAY) has integrated AI into many aspects of its offerings. I believe that these features will give the company a meaningful edge over its competitors, enabling its revenue growth to significantly accelerate over the long-term.
For example, the firm’s AI helps companies quickly identify the best candidates for their open positions and develop the best career paths for their current workers.
On April 10, UBS identified WDAY stock as one of its top AI picks. Plus, analysts expect the firm’s earnings per share to jump to $7.86 next year from $5.84 in 2023.
On the date of publication, Larry Ramer 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