Tech investors will probably remember 2023 as the year when artificial intelligence (AI) became the primary focus of investors. Thanks to ChatGPT, investors bought into stocks that leveraged AI for growth. This is how a new bull market in shares started NVIDIA And palantirAnd many non-tech stocks promoted their AI strategies.Thank you for reading this post, don't forget to subscribe!
Still, some AI stocks have attracted comparatively less coverage, even though AI has significantly improved their value proposition. Knowing this, more investors should take a closer look Duolingo (DUOL -8.08%) and UiPath (Path-1.29%).
In fact, a growing number of language students turn to Duolingo for free learning. Although those lessons primarily revolve around learning languages, the company has also added math and reading lessons.
Not surprisingly, AI has played an increasing role in Duolingo’s processes. Although it has used AI for years, the technology now helps create lesson plans. Additionally, the company recently introduced Duolingo Max, which uses ChatGPT-4 to simulate conversations in other languages or make it clear whether a question is answered right or wrong.
Most of its lessons are free and generate revenue for the site through advertising. Such users make up the majority of Duolingo’s 74 million monthly active users (MAU), a 50% increase from last year.
However, investors would probably prefer that the company offered paid subscription plans that remove ads. And thanks to AI, paid subscribers get access to Duolingo Max. These customers number approximately 5.2 million, an increase of 59% over the last 12 months.
With that customer base, Duolingo generated about $253 million in revenue for the first half of the year, a 43% increase compared to the same period in 2022. And even though it’s still running a modest operating loss, an income tax gain and interest income allowed Duolingo to earn net income of $1.1 million during the period.
Amid such improvements, the stock is up more than 130% this year. Admittedly, the recent price-to-sales (P/S) ratio of 16 may discourage some investors, but given subscriber growth, ownership of Duolingo should translate into profits over time.
Cathie Wood believes that robotics will be one of the primary areas of innovation in the next few years. Therefore, no one should be surprised that their fund has a significant investment in UiPath.
Wood may have settled on UiPath because the company works at the intersection of robotics and software. It uses an end-to-end platform connecting software with enterprise products through application programming interfaces (APIs). As of July 2023, it has attracted approximately 11,000 customers.
Furthermore, it stands above competitors through its UiPath community. It includes a network of over 2 million developers, giving them a group they can learn from and support each other. It also makes it less likely that developers will seek out the competitive ecosystem that such networks lack.
Not surprisingly, the company incorporates AI into that automation process. It can use one’s custom-built or prepackaged machine learning models, managed through the MLOPS command center. The drag-and-drop interface found in UiPath Studio can quickly insert such models.
These applications helped boost UiPath’s revenue to $577 million in the first half of 2023, an 18% increase over the same time frame last year. Additionally, due to cuts in operating expenses, the loss fell to $92 million in the first six months of the year. UiPath lost $243 million in the first half of 2022.
Despite that improvement, the stock has traded in a range for most of 2023, although it is up about 30% for the year. UiPath’s P/S ratio is around 8, which is slightly above the stock’s record low. A situation like this could make this an excellent time to add shares before more investors discover this robotics stock.
Will Healey holds positions at Palantir Technologies. The Motley Fool has positions on and recommends Duolingo, Nvidia, Palantir Technologies, and UiPath. The Motley Fool has a disclosure policy.