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2 Millionaire-Maker Artificial Intelligence (AI) Stocks to Buy Now

When investors think of millionaire-makers in the artificial intelligence (AI) space, they often look to Nvidia. Indeed, it has logged massive gains from the technology, and with a market cap approaching $2.6 trillion, it has turned small investors into millionaires.

Fortunately, Nvidia is not the only AI success story. Many are smaller stocks with the potential to still see much larger growth. While nobody can promise a small investment will turn one into a millionaire, these two stocks should at least bring them much closer to that goal in the coming years.

1. Zscaler

Cybersecurity firm Zscaler (NASDAQ: ZS) is a stock positioned for massive growth. It has become a leading cybersecurity stock by pioneering one niche in this field: zero trust.

Zero trust assumes everyone trying to log onto a network is a hacker. These users must prove their identity using devices, location, rank, or another unique identifier. Additionally, one's position in an organization can determine the degree of access granted, mitigating the damage should a breach occur.

Moreover, its zero-trust technology allows users to secure generative AI workloads. It also uses AI to identify security threats proactively and work to prevent actions that place one's data at risk.

Furthermore, despite growing about 425% since its 2018 initial public offering (IPO), the stock's market cap is $26 billion as of the time of this writing, a small enough size that the rapid growth could continue under the right circumstances.

In the first half of fiscal 2024 (ended Jan. 31), revenue of $1.0 billion rose 38% versus the same period in fiscal 2023. This was faster than the 24% rise in operating expenses, reducing the net loss for the first two quarters of fiscal 2024 to $62 million. Zscaler lost $126 million in the same period last year.

Despite a more recent pullback, the stock has risen by about 35% over the last 12 months. Also, even with a price-to-sales (P/S) ratio of 14, the sales multiple is near record lows for the stock, indicating that now could be an excellent time to buy.

2. DigitalOcean

Another AI stock overlooked by many investors is DigitalOcean (NYSE: DOCN). With a market cap of $3.4 billion, it is a cloud infrastructure provider that competes with the world's largest tech companies.

DigitalOcean has carved out a niche among small and medium-sized enterprises. This is because DigitalOcean posts its pricing, and it operates a community that includes other customers and a library of educational materials. This enables customers to operate an affordable cloud platform and resolve issues that may arise.

Furthermore, last year, DigitalOcean acquired a company called Paperspace to bolster its AI capabilities. Additionally, Paddy Srinivasan recently became CEO. He was previously CEO of SaaS company GoTo and has worked for Amazon and Microsoft, giving him the experience needed to lead a company like DigitalOcean.

The new leadership could also help the company capitalize on what it estimates is a $213 billion opportunity by 2027. For now, it has barely scratched the surface of that addressable market.

Revenue in Q1 was $185 million, and that 11% yearly increase lagged the 20% revenue growth in 2023. Still, operating expenses fell in Q1, enabling the company to earn a net income of $14 million, up from the $16 million loss in the same quarter last year.

That turn to profitability may help stoke stock price growth, which was modest over the last year.

Also, it supports a P/S ratio of 5, and despite just turning profitable, it sells for a forward P/E ratio of 23. Considering its improved financial condition, the low valuation and massive addressable market could help stoke rapid stock price growth for the foreseeable future.

Should you invest $1,000 in Zscaler right now?

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Will Healy has positions in DigitalOcean and Zscaler. The Motley Fool has positions in and recommends DigitalOcean, Nvidia, and Zscaler. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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