Artificial intelligence (AI) is disrupting and enabling innovation across industries. So far, AI research organizations like OpenAI and Anthropic are leading the charge and seeing revenue explosion.
Today, companies are integrating AI into applications such as email, shopping carts, and customer service. Indeed, over the next decade, this technology is set to become ubiquitous.
Due to the expected growth, tremendous growth is happening in first derivative beneficiaries. For instance, Nvidia (NASDAQ:NVDA), manufacturing graphic processing units for training and inference, is up over 230% year to date (YTD). Also, Microsoft (NASDAQ:MSFT), at all-time highs, is witnessing rising investor interest as it launches Copilot.
And while clear beneficiaries, these two stocks are already trillion-dollar companies. Their multibagger potential may be limited going forward due to the law of large numbers.
Instead, look out for these smaller AI stocks with new market innovations to power your portfolio.
ServiceNow (NOW)
The IT service management (ITSM) leader ServiceNow (NYSE:NOW) offers workflow applications across technology, customer and industry, employee, and creator domains. The company provides these applications through the Now Platform. This allows global organizations to digitize workflows while improving productivity.
Today, the firm is leveraging generative AI to help organizations improve business outcomes and human experiences. The latest release, Vancouver, features generative AI capabilities for every workflow.
According to CEO Bill McDermott, generative AI represents a growth tailwind. At the end of Q3 fiscal year 2024, ServiceNow had over 300 customers in its pipeline for its GenAI product. After Vancouver’s release on September 29, the company received the highest number of customer requests in history. Notably, with only one day to close the quarter, it signed four large deals.
Further, leading companies such as Nvidia are using the Now Platform, and governments are another growth vector. For instance, in Q3, demand from federal customers soared, with net new annual contract value growing 75% year over year (YOY).
Due to AI-driven growth, management sees subscription revenues of $8.635 billion to $8.640 billion, representing 25% YOY growth. Renewal rates and new customers are increasing as CEOs lean on generative AI to drive business transformation.
Intuit (INTU)
Intuit (NASDAQ:INTU) is an accounting and tax solutions service that helps small and medium-sized businesses handle their financials. Currently, the company has over 100 million consumer and business customers globally.
Due to its scale, Intuit has access to large amounts of customer data. Over the last five years, the company has worked towards becoming an AI-driven expert platform. Even before AI was fashionable, the firm was making AI investments.
Generative AI will be crucial in unlocking Intuit’s $300 billion TAM. The company relies on customer data to train its models and build differentiated customer value. Recently, the company launched Intuit Assist, a generative AI-powered assistant that offers personalized and intelligent recommendations. It delivers productive insights across Intuit products such as TurboTax, QuickBooks, Mailchimp, and Credit Karma.
By harnessing robust customer data, Intuit Assist can deliver personalized recommendations for consumers and businesses. For instance, Intuit Assist for TurboTax can decipher a customer’s tax situation and provide recommendations. Additionally, it will offer insights on accurately filing taxes and maximizing tax refunds.
On the other hand, Credit Karma users will benefit from personalized answers to their money questions. Using their financial data, Intuit Assist will help members contextualize their finances and provide customized recommendations. Intuit Assist for QuickBooks will unearth financial insights such as business cash flow hot spots.
Customers adopting Intuit Assist means significant upsell opportunities. Additionally, the company has other AI products, including MailChimp Creative Assistant and GenOS, to build capital.
NICE (NICE)
NICE (NASDAQ:NICE) provides contact center services to businesses globally. Although the Israel-based company suffered a temporary setback due to the Hamas attack, it remains a top AI stock. The adoption of generative AI is transforming customer service within the contact center.
Over the years, automating the customer experience has been attempted. With AI, creating an agentless and consumer-led experience is possible. NICE customer experience AI has the data, knowledge, and interactions to deliver a proactive AI-driven service. Notably, the company counts 85 of the Fortune 100 companies as customers.
On October 16, Morgan Stanley upgraded the stock to overweight. Analyst Meta Marshall believes the firm will capture the conversational AI market among enterprise customers. According to Marshall, the contact center technology market will grow 18% annually over the next five years, driven by demand for virtual agents.
Considering its leadership position, NICE is well-positioned to capture this demand. Indeed, according to Gartner, the company has been a leader in Contact Center as a Service (CCaaS) for nine consecutive years. CXone, its customer experience cloud platform, is now a comprehensive digital engagement and AI platform.
In the third quarter report, management highlighted the incremental revenue opportunity from AI. During the quarter, 80% of new enterprise deals included the CX AI platform. Additionally, CXone AI bookings have increased 163% YTD.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.