The rise of generative artificial intelligence (AI) is paving the way for a smarter future.
Not only are workforces getting more efficient from an operational standpoint. But also they stand to bolster their growth rates over the medium- and, more importantly, the extremely long term. It’s the long-lasting benefits that are most exciting when it comes to the top AI plays. Investors are watching those that are taking off right now, as well as those that have been long forgotten.
In this piece, we’ll tune into three AI enablers (call them AI ambassadors) that stand out as longer-term AI winners. But, they could continue to endure a great deal of volatility and uncertainty regarding their nearer-term AI trajectories.
With modest multiples at writing, such names, I believe, will be well worth the wait for those looking for an AI stock to hold for the next five years or so.
Snowflake (SNOW)
Snowflake (NYSE:SNOW) may be the most misunderstood AI play out there in recent quarters. The stock is now down a jarring 46% off its 52-week highs of over $234 per share.
A number of notable negatives and uncertainties have contribute to the Snowflake meltdown. The recent Snowflake data breaches, which reportedly affected many of its customers, also fuel the latest drawdown.
However, the good news is most negativity (and misunderstandings) surrounding the name seem mostly factored in at this point. Too many investors are laser-focused on the bad news, leading them to potentially miss out on positive recent developments.
A sudden Chief Executive Officer (CEO) change (Frank Slootman handed the reins to Sridhar Ramaswamy earlier this year), a lukewarm quarter and growth and softening guidance have all been reasons many have opted to sell SNOW stock and ask questions later.
With new AIs like Arctic and Cortex for enterprises to “juice” the full power of the technology, I do view Snowflake as a later-stage beneficiary of the AI race. We just need to give the stock time to settle after the latest snowstorm of negatives.
Adobe (ADBE)
In addition, Adobe (NASDAQ:ADBE) has been hit with lots of negative news lately.
A social-media-focused controversy surrounded a recent update to the terms of service. Indeed, some paying users are worried that their content may be used to train Gen AI models. It’s concerning, to say the least. However, I think the matter is mostly a miscommunication on management’s part.
Even if Adobe were using said data, I think they’d have an opt-out program, top-notch privacy and some sort of compensation program in place. Arguably, such a strategy may be a moat for Adobe. It can make the most of its deeply entrenched platform as it hits back at a growing number of rivals. Those would include Midjourney and Stable Diffusion, in the creative AI space.
With Adobe coming off a strong number alongside a guidance boost, I’d not neglect the underrated AI darling. ADBE stock looks to add to its recent run. Shares are up more than 16% after hours following the reveal.
ServiceNow (NOW)
ServiceNow (NASDAQ:NOW) is another AI winner whose long-term growth may still be underestimated at this juncture. In recent months, NOW stock has been fluctuating wildly. Shares are now attempting a comeback from a steep plunge suffered in the back half of May.
Though ServiceNow is bound for more quarter-to-quarter volatility, I wouldn’t discount the long-term growth-enhancing prospects from Gen AI. Indeed, ServiceNow has been quite vocal about plans to infuse AI across various parts of its platform.
In a recent interview with CNBC, the company’s top boss Bill McDermott went as far as to say AI marks a “shift in the enterprise.” That’s quite a profound statement that could entail significant upside surprises in future quarters.
When AI will really propel NOW stock in a similar fashion as some of its AI peers, though, remains to be seen. At 53.4 times forward price-to-earnings (P/E), you would be paying a premium for the AI exposure. But does it reflect the full extent of the firm’s AI tailwind? Time will tell. I do not think so.
On the date of publication, Joey Frenette held shares of Snowflake. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
