Artificial intelligence (AI) could be the greatest opportunity in the history of the technology industry. Chatbots like ChatGPT and Gemini can already generate text, images, videos, and computer code in a fraction of the time that humans can, leading Wall Street analysts to predict AI could add anywhere from $7 trillion to $200 trillion to the global economy in the coming decade.
Nvidia spearheaded the AI revolution with its industry-leading data center chips designed for processing AI workloads. They catapulted the company to a $2 trillion valuation -- with most of that value created in the last 12 months alone.
There is a clear case for further upside in Nvidia stock, but the AI industry is rapidly expanding. Here's why CrowdStrike (NASDAQ: CRWD) and Confluent (NASDAQ: CFLT) are also great buys right now.
1. CrowdStrike
Generative AI is a powerful tool that can help businesses increase their productivity. However, it's dangerous in the hands of malicious actors who are using it to craft realistic email and audio content, designed to trick corporate employees into handing over sensitive information. Workers constantly interact with the outside world through customers, suppliers, and affiliates, which makes them an easy target for hackers trying to infiltrate their organization.
That's why, according to CrowdStrike, 90% of successful cyberattacks originate at the endpoint (computers and devices). And evidence suggests attacks are on the rise, because Palo Alto Networks has seen a tenfold increase in the frequency of phishing emails over the past 12 months, thanks to AI's ability to create them so quickly.
CrowdStrike fights fire with fire by placing AI at the heart of its Falcon cybersecurity platform, which is a holistic solution spanning cloud security, identity protection, and endpoint protection, among other modules. Its models are trained on 2 trillion security events every day, and they make 180 million indicator-of-attack decisions every second to unmask the intent of malicious actors.
At the end of CrowdStrike's fiscal 2024 fourth quarter (ended Jan. 31), 64% of its customers were using at least five Falcon modules, and the number of customers using eight modules more than doubled compared to a year ago. Both statistics suggest businesses are increasingly aware of the cyber risks they face.
CrowdStrike generated a record $3 billion in revenue during fiscal 2024, which represented a 36% year-over-year increase. The company's guidance suggests revenue could approach $4 billion in fiscal 2025, marking another year of 30% growth. More notably, CrowdStrike generated its first annual profit on a generally accepted accounting principles (GAAP) basis in fiscal 2024, and its non-GAAP (adjusted) net income -- which strips out one-off and noncash expenses like stock-based compensation -- soared 104% to $751 million.
Many of CrowdStrike's smaller competitors, like SentinelOne and Tenable, struggled to achieve profitability so far, which highlights the benefits of this company's scale.
CrowdStrike says its annual revenue could rise to $10 billion within the next seven years, which means there is plenty of growth left in the tank. Even if it does, it would still be a fraction of the company's addressable opportunity, which could be worth $225 billion by 2028.
2. Confluent
Confluent is a leading provider of data streaming technologies. It's a relatively new field born from cloud computing, and it allows businesses to ingest, process, and analyze data in real time so they can deliver live experiences to their customers and make rapid adjustments to their operations to make more money.
The list of use cases for data streaming is growing fast. Retail giant Walmart uses Confluent to manage a live inventory system, where its physical stores and online sales channels communicate with one other every time a product is sold. It means stock levels are autonomously updated in real time across every channel, so Walmart can replenish the shelves before a particular product sells out.
AI is an emerging use case for data streaming and it could be a significant opportunity. Confluent says traditional machine learning models are trained for a specific purpose, whereas large language models -- like those developed by ChatGPT creator OpenAI -- can be trained and reconfigured in real time. For example, ChatGPT learns every time a user enters a prompt, so there has to be a live transmission mechanism for that data.
But data streaming's role runs even deeper. ChatGPT can probably tell you the fees charged by a given airline for checked luggage because that information is available on the internet. But ChatGPT can't tell you anything about your specific flight, nor can it help you upgrade your seats because that data is not publicly available. However, an airline could build a virtual assistant using ChatGPT's technology and stream its internal data for their customers' use -- in essence creating a ChatGPT-like application with the capabilities I mentioned.
It's early days for such use cases, but Confluent can play a pivotal role in helping businesses feed their live data into AI models to create unique, convenient experiences for customers.
Last year, Confluent generated a record $777 million in revenue, which represented 33% growth compared to 2022. The company serves 4,960 businesses and it maintains a net revenue retention rate of 125%, which means those customers are spending 25% more money with each passing year.
Here's the best part: Confluent says its addressable opportunity was worth $60 billion in 2022, but it could increase to $100 billion as soon as 2025. As the use cases for data streaming continue to grow, so will the demand for Confluent's technology.
Should you invest $1,000 in CrowdStrike right now?
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Confluent, CrowdStrike, Nvidia, Palo Alto Networks, and Walmart. The Motley Fool has a disclosure policy.
