A once-in-a-decade investment opportunity: 2 artificial intelligence (AI) stocks to buy now

During a CNBC interview, Wedbush Securities analyst Dan Ives called artificial intelligence (AI) the fourth industrial revolution. He drew parallels between the burgeoning AI market, the creation of the Internet in 1995 and the launch of the iPhone in 2007. Ives expects “a wave of AI spending” to supercharge the tech sector in the coming years.

Similarly, billionaire fund manager Dan Loeb told clients that artificial intelligence “has matured to the point where it is driving a transformative technology platform change similar to those seen roughly once a decade: the personal computer in the 1980s , the internet in the 1990s, mobile in the 1990s. 2000s and cloud in the 2010s.”

In short, AI is a once-in-a-decade investment opportunity. That’s not to say that the so-called AI bubble — a phenomenon whereby numerous AI stocks have gained substantial value in a short period — will never burst. There will undoubtedly be setbacks and setbacks along the way. But smart investors will ignore temporary obstacles because they know interest in AI is here to stay.

Here’s why Amazon (AMZN 0.52%) and Docebo (DCBO 1.73%) could help investors capitalize on this once-in-a-decade opportunity.

1. Amazon

Amazon reported mixed financial results in the second quarter, with its top line growing slightly slower than analysts expected. Specifically, revenue rose 10% to $148 billion, but Wall Street was expecting $148.6 billion. However, GAAP net income rose 94% to $1.26 per diluted share, easily beating the consensus estimate of $1.03 per diluted share.

Unfortunately, Wall Street was also disappointed by the guidance. Management said operating income would rise between 3% and 34% in the third quarter, but analysts had expected a 37% increase. However, the shortfall is due to investments in AI infrastructure and fulfillment capacity for the holidays, as well as digital content costs associated with NFL Thursday Night Football, all of which are valuable expenses.

Looking ahead, Amazon should continue to benefit as e-commerce spending grows, but its biggest opportunities lie in digital advertising and cloud computing. Amazon is the third largest digital advertiser worldwide, and the company is gaining weight so quickly that it could overtake second place. Meta platforms by the end of the decade, according to eMarketer.

Amazon Web Services (AWS) runs the world’s largest public cloud and has increased its lead by one percentage point over Microsoft Azure and AlphabetGoogle Cloud Platform in the second quarter. AI is one of the reasons why AWS is gaining market share. New products like Amazon’s generative AI development platform Bedrock and Amazon’s coding assistant Q are gaining traction for customers.

CEO Andy Jassy recently told analysts, “Our AI business continues to grow dramatically at a multibillion-dollar revenue rate despite being so early.” AWS is perfectly positioned to meet demand for AI cloud services because it operates the largest public cloud and spends heavily on product development, from custom AI chips to software.

Looking ahead, Wall Street expects Amazon to grow earnings per share by 25% annually through 2025. That consensus estimate makes the current valuation of 42 times earnings seem reasonable. These figures give a price-to-earnings-growth (PEG) ratio of 1.7, a significant reduction from the three-year average of 2.9. Investors should feel comfortable buying a short position in this stock today.

2. Docebo

Docebo specializes in corporate learning software. Its learning management system enables companies to create, organize, deliver and measure the impact of training in internal and external use cases. To elaborate, companies can use the platform to train employees and partners and integrate customer-facing education into their products.

Docebo differentiated itself through two innovative applications. Docebo Flow allows users to integrate learning content into other applications, allowing employees to learn during their normal workflow. Docebo Shape uses generative AI to transform source materials such as online articles, corporate documents and case studies into learning content.

In a note to clients, Morgan Stanley analysts Josh Baer and Keith Weiss wrote, “Docebo is not only disrupting the in-house learning management system (LMS) market by taking share from legacy vendors, but is also the market leader in a greenfield external learning opportunity.”

Docebo reported solid second quarter financial results that beat top and bottom line expectations. The number of customers increased by 9% and the average contract value increased by 10%. In turn, revenue increased 22% to $53 million and adjusted net income increased 86% to $0.26 per diluted share. Interim CEO Alessio Artuffo told analysts: “Our leadership in the learning industry, coupled with our effective use of artificial intelligence, continues to differentiate us from legacy competitors.”

Looking ahead, Grand View Research estimates that LMS spending will grow at 19% annually through 2030. Docebo should match that pace, with the potential upside stemming from its generative AI application. Wall Street expects Docebo’s adjusted earnings to grow 58% annually through 2025. That makes its current valuation of 83 times adjusted earnings look reasonable. Patient investors should feel comfortable buying a small position today.