Investing $500 in these companies and holding them for the long term may be a smart move.
Buying and holding top stocks for the long term is one of the best ways to profit in the stock market. This strategy allows investors to take advantage of long-term growth trends and also benefits from the power of compounding.
For example, a $500 investment made in the Nasdaq 100 Technology Sector Index 10 years ago is now worth $2,300, which translates to an annual growth rate of 16% over this period. So if you have $500 to spare right now, after you’ve paid off your bills, cleared a big loan, and saved enough for tough times, you’re using that money to benefit from growth. It can be a good idea to invest in stocks of companies. Introduction of artificial intelligence (AI).
That’s because the global AI market is expected to grow at an annual rate of 28% through 2030, reaching approximately $827 billion in annual revenue by the end of 2020. The introduction of this technology will impact multiple industries, from cloud computing to digital advertising.
In this article, we examine the prospects of two companies operating in these niches that are already benefiting from rapidly expanding AI adoption, and provide these companies with $500 (individually or in combination). Find out why it makes sense to invest.
1. Trade Desk
The Trade Desk (TTD 0.08%) is a programmatic, cloud-based platform that allows advertisers to purchase ad inventory, manage and optimize campaigns across various channels including video, mobile, e-commerce, and connected TV. We operate an advertising platform. Trade Desk’s automated platform uses real-time data to improve advertisers’ return on investment, enabling them to buy the right ad at the right time and show it to the right audience.
According to TechNavio, the programmatic advertising market is expected to add $725 billion in revenue between 2023 and 2028 at a compound annual growth rate of 39%, making it an attractive business for the company to operate in a fast-growing niche market. It’s worth noting that there are. The Trade Desk has been leveraging AI to capture this massive end-market opportunity.
The company launched Kokai, a programmatic advertising platform that utilizes AI, in June 2023. Kokai analyzes 13 million ad impressions every second and says it “helps advertisers buy the right ad impressions at the right price and reach their target audience at the right time.” . ” The good news is that The Trade Desk’s customers are already seeing a higher return on their advertising dollars thanks to Kokai.
At the August earnings call, The Trade Desk management pointed out the following:
Campaigns that moved from Solimar to Kokai saw a total incremental reach increase of over 70%.
Cost per acquisition improved by approximately 27% due to an approximately 30% increase in data elements per impression. Additionally, performance metrics are improved by approximately 25%, helping you free up your platform’s performance budget for years to come.
Solimar is The Trade Desk’s programmatic advertising platform launched in 2021. So, given the significant improvement in ad performance, it wouldn’t be surprising to see more of the company’s customers migrate to the AI-enabled Kokai. More importantly, The Trade Desk’s focus on integrating AI has also helped it accelerate growth.
The company’s revenue for the second quarter of 2024 was $585 million, an increase of 26% year-over-year, compared to an increase of 23% year-over-year. Adjusted earnings grew at a fast pace of 39% year over year to $0.39 per share. The company’s third-quarter revenue forecast is $618 million, which represents 27% year-over-year growth and suggests it’s on track for accelerating sales growth this quarter. .
The good news is that analysts expect The Trade Desk’s earnings growth to accelerate in the future.
TTD EPS estimates for current year data by YCharts
The company is expected to post 26% annual profit growth over the next five years, but it’s largely due to recent trends and significant changes in the programmatic advertising market (which The Trade Desk executives estimate is worth $1 trillion). Given the available opportunities, it is suggested that it may outperform the consensus. Estimated value.
With an improving growth profile, the market has priced The Trade Desk stock up 50% in 2024 so far, and its positive outlook suggests the stock could continue to rise. . That’s why investing $500 right now is worth considering The Trade Desk’s price-to-earnings ratio (PEG ratio) of 0.6, making it an undervalued stock with a price-to-earnings ratio (PEG ratio) of 0.6. may be a wise choice in the long run. Growth expected to occur.
2. Oracle
The cloud computing market has benefited greatly from the initial expansion of AI adoption. Grand View Research estimates that the cloud AI market could grow at 40% annually through 2030, generating $647 billion in revenue by the end of 2030. Forecast period. Oracle (ORCL 0.38%) is growing significantly thanks to the rapid growth of the cloud AI market, as evidenced by the company’s recent performance.
Oracle’s cloud revenue for the first quarter of fiscal 2025 (ending Aug. 31) increased 21% year over year to $5.6 billion, outpacing the company’s total revenue growth of 8% to $13.3 billion. Specifically, the Oracle Cloud Infrastructure (OCI) business posted an impressive 45% year-over-year growth of $2.2 billion.
OCI is the company’s Infrastructure as a Service (IaaS) business, through which it rents cloud infrastructure to customers who want to train AI models. Management notes that demand for OCI exceeds supply, with the business’ annual revenue run rate currently at $8.6 billion. Demand for Oracle’s cloud infrastructure products has been so strong that its remaining performance obligations (RPO) reached $99 billion last quarter, an impressive 52% year-over-year increase.
It is worth noting that RPO is the total value of a company’s future contracts that have not yet been fulfilled, and AI is playing a central role in increasing this metric. Oracle notes that “Cloud RPO has increased by more than 80% and now accounts for nearly three-quarters of total RPO.”
Given the huge opportunity that exists in the cloud AI market, it is no surprise that demand for Oracle’s cloud infrastructure will grow at a steady pace for many years to come. This is also why consensus forecasts predict Oracle’s revenue will grow by double digits in the next three fiscal years, after increasing just 6% to $53 billion in fiscal 2024.
ORCL earnings forecast data for current year by YCharts
Oracle is up 57% year to date in 2024. Investors would do well to act quickly to add this cloud stock to their portfolios. The company still trades at an attractive multiple of 27 times forward earnings, a slight discount to the forward earnings multiple of the Nasdaq 100 Index. Its large addressable market and huge backlog, which is growing due to the rapid adoption of cloud AI services, could lead to further stock price appreciation in the future.
