3 Promising AI and Automation Stocks to Buy for the Next Tech Revolution

Stocks to buy

On Wall Street, many artificial intelligence (AI) and automation stocks have been leading the charge in 2024. As these transformative technologies continue to reshape industries, long-term investors turn their attention to companies at the revolution’s forefront.

According to a report by McKinsey, AI technologies could potentially deliver additional global economic output of $13 trillion by 2030. In addition, the management consulting group suggests that AI and automation “…are transforming businesses and will contribute to economic growth via contributions to productivity.”

The potential for explosive growth in the AI and automation sectors is undeniable. So, this creates an opportune time to identify the most promising players. From self-driving cars to advanced robotics in manufacturing, and from sophisticated algorithms powering financial decisions to AI-driven healthcare solutions, the applications of these technologies seem limitless. With that information, let’s explore three promising AI and automation stocks.

Rockwell Automation (ROK)

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Industrial automation and digitalization solutions heavyweight Rockwell Automation (NYSE:ROK) offers factory automation software, industrial control systems and information solutions used across a wide range of industries.

In early May, Rockwell Automation released mixed results for the second quarter. The company reported revenues of $2.126 billion with an organic 8% year-over-year (YOY) decline. Despite the decline, it was above market expectations. Adjusted EPS came in at $2.50, also surpassing expectations.

Recently, Rockwell Automation and Nvidia (NASDAQ:NVDA) announced a collaboration to develop next-generation autonomous mobile robots using NVIDIA’s Isaac robotics platform. This collaboration aims to improve efficiency and performance in manufacturing facilities. Rockwell Automation’s OTTO Motors division will create the robots.

Despite these positive steps, ROK stock has declined close to 17% year-to-date (YTD). Meanwhile, the dividend yield is over 1.9%. Currently, Rockwell shares are changing hands at 23.1 times forward earnings and 3.3 times sales. The 12-month median price forecast is $292.50, suggesting an upside potential of  13%.

Pegasystems (PEGA)

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Enterprise software company Pegasystems (NASDAQ:PEGA) focuses on customer relationship management (CRM) and business process management (BPM) solutions. PEGA is known for its platform that helps organizations streamline their operations and enhance customer engagement through automation and AI.

Also, Pegasystems reported a strong first quarter, exceeding analyst expectations. Revenues were $330 million, just 1% above last year’s first quarter. Adjusted EPS came in at 48 cents, a significant 109% YOY increase.

Recently, the software company made strides to expand its cloud capabilities and strengthen its partner ecosystem. Pegasystems announced it will expand its Pega GenAI framework to integrate with generative AI models from Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Cloud and Amazon’s (NASDAQ:AMZN) AWS. This expansion will enable Pegasystems’ clients to use a variety of AI models to enhance workflows and decision-making processes.

Over the past quarters, PEGA stock has been getting attention for its potential in the rapidly growing low-code application development market. This segment is expected to grow at a compound annual growth rate (CAGR) of 22.5% from 2024 to 2030.

Since January, Pegasystems stock has advanced 20%. At present, PEGA shares are trading at 21.6 times earnings and 3.5 times sales. Meanwhile, the 12-month median price forecast for PEGA stands at $70.00, an upside potential of 19%.

ServiceNow (NOW)

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A prominent player in the enterprise cloud computing space, ServiceNow (NYSE:NOW) offers a suite of solutions that streamline and automate various business processes across industries. Founded in 2004, ServiceNow has grown to become a key provider of workflow automation, robotic process automation (RPA), AI and machine learning solutions.

Further, ServiceNow’s recent quarterly earnings showcased the company’s robust performance and growth trajectory. Subscription revenue grew by 24.5% YOY, surpassing the high end of guidance. Investors were pleased with the strong adoption of generative AI products, with Pro Plus net new Annual Contract Value (ACV) continuing a strong trend. Also, management raised its subscription revenue guidance for fiscal year 2024 to $10.560 billion to $10.575 billion, representing 21.5% to 22% YOY growth.

The global cloud computing market is expected to grow at a CAGR of over 21% from 2024 to 2030. We believe ServiceNow is well-positioned to capitalize on this growth, given its strong market presence and continuous innovation in cloud-based workflow solutions.

YTD, NOW stock is up 6%. Yet, investors should note that shares command a premium valuation of 53.5 times forward earnings and 16.3 times trailing sales. Finally, Wall Street’s 12-month price target suggests a potential advance of 13.5% from current levels.     

On the date of publication, Tezcan Gecgil did not have (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.

Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.

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