Don’t Overlook Stealth AI Plays

The market’s love of AI stocks has helped lead to a strong rally this year. However, investors have largely poured money into large-cap chipmaking stocks as a way to play that trend.

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  • Doing so overlooks companies that can see big improvements in productivity and returns by embracing companies using AI software themselves. Once the market figures out the opportunity at the software level, which doesn’t involve the expenses of producing physical hardware, returns could take off.

    One leader in the AI software space is Salesforce (CRM). The company just updated on its Einstein AI software this week.

    While investors have already rewarded shares with a 42 percent rally over the past year, that’s small compared to the move in chipmaker AI stocks.

    Salesforce grew revenues by 12 percent last year, in a sluggish economy for consumer spending. And their profit margin was a mere 5 percent. With AI, they can improve their profitability, even without any big changes in revenues.

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  • Action to take: Salesforce could be a big AI winner in the years ahead. Investors may want to buy some shares now and use any market drop to buy more.

    For traders, shares are in an uptrend, and close to breaking out to new 52-week highs. The January 2024 $250 calls, last going for about $6.00, could see mid-to-high double-digit gains.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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