Nvidia has soaked up the trillions of dollars in value created by AI so far, but software stocks could be the next opportunity for investors.
Last year, Ark Investment Management CEO Cathie Wood said that software companies will be the next big opportunity in artificial intelligence (AI), predicting that they will eventually generate $8 in revenue for every $1 spent on chips from leading suppliers such as. Nvidia.
Ark operates several funds (both private and exchange-traded) that reflect this stance. Using the Ark Venture Fund, Wood has invested in private AI software companies such as OpenAI, Anthropic and Elon Musk’s xAI. Plus, Tesla it is the largest possession on the ship Ark Innovation ETFwhich Wood says is the biggest AI opportunity in the world thanks to its autonomous self-driving software.
If Wood is right about the AI ​​software, there could be a long list of winners in the coming years. That is why CrowdStrike (CRWD -2.28%) AND Meta Platforms (META 0.36%) may be two of the largest.
1. CrowdStrike: A leader in AI-powered cyber security
CrowdStrike is one of the best cyber security companies in the world. In fact, its stock only needs to rise another 14% to eclipse the current industry leader’s $104 billion valuation. Palo Alto Networks. CrowdStrike’s success stems from its unique lightweight security architecture and reliance on AI to autonomously thwart attacks.
CrowdStrike’s AI models make over 180 million decisions about attack indicators every second — in other words, they’re constantly analyzing attackers’ motive and intent to determine the type of threat they pose. These models are trained on more than 2 trillion security events every day, and that number grows as more customers join CrowdStrike, which extends the company’s AI edge over its competitors.
All of this happens in the cloud. By using CrowdStrike, companies don’t have to install large programs on every single device in their organization. Instead, they install a lightweight sensor that’s connected to the cloud, which takes up minimal processing power compared to traditional cybersecurity software.
CrowdStrike has taken a platform approach to cybersecurity since its founding, which contrasts with industry norms where different providers specialize in specific segments such as cloud security, identity protection, and endpoint security. CrowdStrike covers all the bases through its 28 modules, and while not every business needs the entire suite, 65% of customers used five or more modules as of the last first quarter of fiscal 2025 (ended April 30).
According to a CrowdStrike-sponsored study by International Data Corporation, businesses can save $6 for every $1 they invest in consolidating their cybersecurity needs into a single platform. Therefore, not only do they get best-in-class protection, but switching to CrowdStrike is a financially no-brainer.
CrowdStrike ended the first quarter with a record $3.6 billion in annual recurring revenue, but management believes that figure will grow 177% to $10 billion within the next five to seven years. That estimate may even be conservative considering how quickly AI is advancing, which will not only improve CrowdStrike’s defensive capabilities, but create new threats that will drive more cybersecurity spending in the security sector. corporations.
2. Meta Platforms: A social media giant turned AI developer
Meta Platforms is home to major social networks like Facebook, Instagram and WhatsApp, which serve 3.2 billion people every day. The company is already using AI to curate content feeds for each user on Facebook and Instagram to make sure they’re seeing posts that are most relevant to them. Last year, this resulted in increased engagement on both platforms, which gave Meta more opportunities to generate ad revenue.
But the company may have an even bigger AI opportunity in its large language model (LLM) called Llama. It’s the world’s largest open source model, so developers can use it for free to build their own AI applications, which allows Meta to gather its testing to make improvements faster. This is important because Llama is key to creating new AI features for Meta’s existing platforms.
For example, the company launched a chatbot called Meta AI last year that users can access through Facebook, Instagram, Messenger and WhatsApp. It can answer complex questions and generate images like most chatbots, but it can also be added to group chats to make restaurant and travel recommendations, or even offer gift ideas. Meta AI is currently powered by the Llama 3, but the company is already training its next-generation model, which should offer even better capabilities.
Eventually, any business using Meta’s apps can have its own custom Meta AI-style chatbot that can handle incoming customer inquiries and potentially even process sales. This should create new opportunities for Meta to generate revenue.
Here’s the best part about Meta shares: It’s free. Based on the company’s trailing 12-month earnings of $17.41 per share, it trades at a price-to-earnings (P/E) ratio of 28.9. That’s a 9.4% discount to its 31.9 P/E ratio Nasdaq-100 index.
In 2025, Wall Street thinks Meta will generate $21.59 in earnings, which puts its forward P/E ratio at just 23.3. That means Meta stock would have to rise 36.9% by the end of next year just to trade in line with the broader tech sector.
If Cathie Wood is right about AI software, Meta stock could be an even bigger bargain today than the numbers above suggest, because there could be entirely new opportunities for AI monetization, while this story unfolds.
Randi Zuckerberg, a former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Meta Platforms, Nvidia, Palo Alto Networks and Tesla. The Motley Fool has a disclosure policy.