2 Promising Tech Stocks for Future Wealth

Transforming a modest investment into a large sum is within reach for many investors. The key is to make informed choices and ensure you're diversifying your investments properly. While no one can predict market outcomes with certainty, creating a portfolio of growth stocks can significantly improve your chances of experiencing substantial returns.

With this in mind, let's explore two tech companies that could potentially enhance your portfolio in the long run.

1. C3.ai

The demand for enterprise artificial intelligence (AI) software is escalating, making it an exciting area for potential investment. According to Statista, the overall AI market is expected to expand at a robust annual growth rate of 27% through 2030, ultimately reaching $826 billion. C3.ai (AI -4.50%) stands out as a prominent player in this sector, providing AI software primarily for the U.S. military and large corporations. The company’s revenue growth has been impressive, aligning well with market projections.

Notably, C3.ai's revenue has increased for seven straight quarters, achieving a year-over-year growth of 29% in the latest quarter. A significant factor driving this growth is its strategic partnerships with major cloud service providers, such as Microsoft. Recently, Microsoft expanded its partnership with C3.ai, enhancing the company’s long-term growth opportunities. Last quarter alone, C3.ai secured 58 new agreements, with clients such as ExxonMobil, Coca-Cola, and various U.S. government agencies.

However, C3.ai does face challenges related to profitability. The company reported an adjusted net loss of $0.06 per share in its most recent quarter, which has impacted its stock performance. Despite this, management expects revenues to outpace expenses over time, suggesting that profitability could soon follow as the organization continues to grow. If C3.ai meets its ambitious forecasts, its stock value could greatly increase in the next decade.

Currently, C3.ai is on the smaller side, with $346 million in trailing twelve-month revenue. While it isn't yet profitable, it had $730 million in cash and short-term investments at the end of the last quarter. Investors willing to ride out some short-term price fluctuations could find significant long-term rewards.

2. Shift4 Payments

Shift4 Payments (FOUR -2.05%) is a rapidly expanding software and payment processing firm. It primarily serves sectors like resorts, restaurants, and sports and entertainment, where it ranks as either the leader or a close contender in market share. The company has achieved an impressive average quarterly revenue growth of 36% year-over-year over the last two years, indicating a robust growth opportunity.

A major factor fueling Shift4's expansion is the trend of merchants consolidating multiple software solutions into a single system. For instance, some hotels previously relied on separate systems for check-in and dining, which is inefficient. Shift4 Payments resolves this inefficiency by providing a comprehensive system that addresses all payment-related needs, including security, reporting, and analytics.

Furthermore, Shift4 is creating a strong competitive edge by acquiring businesses with substantial customer bases. By integrating these acquisitions, Shift4 can bundle services and cross-sell to thousands of new clients.

Although the financing of these acquisitions has resulted in long-term debt of $2.8 billion, Shift4 is also holding $1.4 billion in cash. Moreover, it has begun to see improvement in profit margins, with a reported 56% year-over-year increase in net income during the first three quarters of 2024, totaling $113 million.

Shift4's stock has mirrored its growth, increasing by 86% in the past three years. With a current trading valuation of 22 times the earnings estimate for this year, the stock presents a reasonable opportunity for investors seeking growth in the payment processing sector.

The author has no positions in the stocks mentioned. Please note that investing in stocks carries risks, and it's essential to do thorough research before making investment decisions.

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