Artificial Intelligence (AI) Software Sales Could Soar 580%: 2 AI Stocks to Buy Now (Hint: Not Palantir)

AI adoption is rapidly increasing, with Goldman Sachs estimating 9.2% of U.S. companies now utilize AI, and Morgan Stanley projecting AI software revenues to exceed $400 billion by 2028. While Palantir is positioned to benefit, MongoDB and Okta are presented as potentially more attractively valued alternatives, with MongoDB leveraging AI through its database solutions and recent acquisition of Voyage AI, and Okta utilizing AI in its cybersecurity platform, including its new Identity Threat Protection product; both companies reported strong recent earnings growth, though Okta's stock experienced a dip due to cautious guidance.

Analysis

The artificial intelligence market is undergoing significant expansion, with Goldman Sachs reporting a twofold year-over-year increase to 9.2% in AI adoption among U.S. companies for goods and services production, and Morgan Stanley forecasting AI software revenues to surge 580% to exceed $400 billion by 2028. While Palantir (PLTR) is acknowledged as well-positioned, the article highlights its steep valuation, suggesting investors consider alternatives like MongoDB (MDB) and Okta (OKTA). MongoDB, whose document database excels with both structured and unstructured data crucial for AI, recently acquired Voyage AI to bolster its AI application accuracy. CEO Dev Ittycheria stated, "As AI redefines how applications are built and how businesses operate, MongoDB is exceptionally well positioned." The company's adjusted earnings increased 96% in the most recent quarter, and its stock trades at 49 times adjusted earnings and 7.4 times sales, the latter representing a discount to its one-year (9.5x) and three-year (13.4x) averages; Gartner also ranks MongoDB as a leader in database management systems. Okta, a cybersecurity firm, leverages AI in its identity and access management platform, recently introducing 'Identity Threat Protection' for continuous AI-powered session risk analysis. Okta benefits from cybersecurity's non-discretionary budget status and a projected 12.6% annual growth in the identity market through 2030, driven partly by new AI-related threats. Okta's adjusted earnings rose 32% in its latest quarter, with shares trading at 33 times adjusted earnings and 6.6 times sales, aligning with its three-year average. Despite these strong fundamentals and leadership recognition by industry analysts, Okta's stock experienced a decline following cautious management guidance, which the article frames as a potential opportunity for patient investors. The overall sentiment from the article for these specific AI-related opportunities is strongly positive, with MDB and OKTA specifically showing positive analyst sentiment.

Key Decisions for Investors

• Given the substantial projected growth in the AI software market, investors should assess companies effectively integrating AI, such as MongoDB and Okta, while carefully scrutinizing valuations, as exemplified by the caution regarding Palantir's current stock price.
• MongoDB (MDB) warrants consideration due to its strong 96% adjusted earnings growth, strategic AI enhancements including the Voyage AI acquisition, its database's suitability for AI, and a price-to-sales ratio currently below its historical averages, appealing to growth-focused investors.
• Okta (OKTA) offers exposure to the critical and expanding cybersecurity identity sector, supported by 32% adjusted earnings growth and AI integration; the recent stock price dip following cautious guidance could present a tactical entry point for investors with a long-term perspective on its market position and fundamental strength.