Ever since OpenAI released its renowned chatbot, ChatGPT, AI The investment world has been significantly impacted by the revolution of artificial intelligence (AI). Although the initial excitement may have subsided, the influence of this investment trend is still very much prevalent.
Some well-known AI stocks are currently experiencing a decline due to worries among investors about how they can make money from their AI technologies and ongoing investments in AI infrastructure. Despite this, due to the strong foundation and good financial status of these companies, this decrease could present a good opportunity for smart investors to enter the market. This is why these three AI stocks are considered wise choices following the recent decline.
Microsoft
The initial AI-related investment that may be a wise choice during a decrease in value is the prominent technology corporation. Microsoft ( MSFT 0.19% ) Despite surpassing revenue and earnings expectations in the fourth quarter of fiscal year 2024, the company’s stock has declined by nearly 5.7% following the release of its financial results on July 30. Investors appear concerned about various risks, such as limitations in the company’s ability to provide AI services, which are currently hindering Azure’s expansion in the near term. Additionally, there are worries about the significant investments being made in developing AI infrastructure, a slowdown in European markets, and heightened competition.
Despite the current lack of confidence from investors, there doesn’t appear to be a valid reason for this pessimism in the future. Revenue from Azure and similar cloud services increased significantly by 29% compared to the previous year in the fourth quarter. Furthermore, AI services contributed a substantial 8% to this growth. Microsoft is anticipating a further acceleration in Azure growth in the latter half of fiscal 2025, supported by the company’s ongoing investments to expand AI capabilities in response to market demand. As of the end of the fourth quarter, Azure AI boasted 60,000 customers, marking a 60% increase from the previous year, with an upward trend in average customer spending.
The AI Copilot assistant has been incorporated by Microsoft into various products such as Microsoft 365, GitHub, Dynamics 365, the Power platform, and cybersecurity services. Additionally, advanced AI features have been integrated into Windows and devices to introduce Copilot+ PCs, recognized as the quickest and most intelligent PCs available. This continuous AI evolution is anticipated to enhance productivity and effectiveness for Microsoft’s clientele, ultimately contributing to increased revenue for the company.
Microsoft experienced a 16% increase in revenue to reach $245 billion, and its operating income also surged by 24% year over year to $109.4 billion. Due to its various AI-driven factors and effective financial management, the company’s stock appears to be a promising investment opportunity in the present market conditions.
Monday.com
The next AI company to consider purchasing during a price decline is a provider of software for managing workflows and projects in the form of software-as-a-service (SaaS). Monday.com ( MNDY -1.61% ) The company assists businesses in coordinating and overseeing workflows together. Despite a recent decrease of nearly 9%, the stock has still shown a 15% increase in 2024.
Monday.com has demonstrated strong pricing power, as shown by its consistent net dollar retention rate of 110% and minimal customer turnover in the initial quarter, even after adjusting its prices. The company anticipates that these pricing adjustments will generate an additional $25 million in revenue by 2024. Furthermore, Monday.com has introduced new offerings like the Monday Sales CRM and Monday Dev, which have played a role in broadening its customer reach.
The company has recently added functionalities like AI automation, intelligent columns, and AI-driven templates. These new features will allow customers to incorporate AI functions into their everyday tasks, promoting greater usage of the company’s platform.
Monday.com’s financial outlook remains robust, with the company projecting revenue between $942 million and $948 million, indicating a 29% to 30% increase compared to the previous year. non-GAAP Operating income is expected to be between $77 million and $83 million in 2024, resulting in an operating margin ranging from 8% to 9%.
In 2024, Monday.com is projected to produce free cash flow ranging from $238 million to $244 million, resulting in a strong free-cash-flow margin of 25% to 26%. Furthermore, as of the first quarter of 2024, the company had approximately $1.2 billion in cash and minimal debt recorded on its balance sheet.
With its impressive operational performance and solid financials, Monday.com could be a wise investment at this time.
Oracle
One of the AI stocks to consider buying on a decline is the company specializing in database management technology. Oracle ( ORCL 0.54% ) The company has quickly become well-known in the present age of cloud computing and artificial intelligence and is now in competition with similar companies. Amazon Microsoft and Apple are two of the biggest technology companies in the world. Alphabet .
The main factor boosting Oracle Cloud Infrastructure (OCI) growth is the rising need for data centers specifically suited for handling sophisticated AI and machine learning tasks. OCI is recognized for its efficiency and affordability in training extensive language models compared to other providers.
Oracle has developed cloud software, operating system, and database that are completely autonomous, reducing the possibility of human errors and improving the security of its cloud platform. The increasing popularity of Oracle Cloud Infrastructure (OCI) is evident from the 30 artificial intelligence agreements worth more than $12 billion that the company secured in the last quarter of fiscal year 2024, which ended on May 31st.
By collaborating with Microsoft Azure and Google Cloud, Oracle is able to leverage customers’ use of multiple cloud platforms. This partnership enables businesses to utilize Oracle technology for transferring on-premise databases to the cloud, whether it be on OCI or databases hosted on Azure or Google Cloud. Oracle’s revenue from cloud database services increased by 26% in the last quarter, reaching an annual run rate of $2 billion. The company anticipates that cloud database services will continue to drive significant growth in the future.
Oracle announced a significant 44% increase in remaining performance obligations, also known as order backlog, which totaled $98 billion by the end of the fourth quarter. This suggests that the company’s financial results could be strong in the upcoming quarters. Despite these advantages, the stock is trading at a modest valuation of 17.8 times forward earnings. Therefore, investors are advised to consider investing in this reliable artificial intelligence stock by acquiring at least a small portion of it now.
