If you want to invest in artificial intelligence (AI), there are plenty of companies to choose from. Household names like Microsoft or Nvidia come to mind.
However, keep in mind that these companies are worth trillions of dollars today. There is a good chance that their best returns are in the rearview mirror. You'll need to venture into the unknown if you're hunting for life-changing investment returns.
These stocks are not for those squeamish about volatility. They should all be considered high-risk stocks that warrant a small piece of a diversified portfolio.
With that in mind, consider this list of moonshot, home run-swing, and under-the-radar AI stocks.
1. SentinelOne
Cybersecurity and AI are natural fits. SentinelOne (S +5.19%) embodies this marriage of the two technologies as a fully autonomous security platform that uses AI to hunt for and eliminate cyber threats proactively.
Cybersecurity is a remarkably competitive but crowded market. Eventually, the cream rises to the top, and SentinelOne is among the best security products. It's a regular high-performer on third-party benchmark tests and a leader on Gartner's Magic Quadrant rankings for endpoint security.
NYSE: S
Key Data Points
The need for security only grows over time due to increasingly complex threats and a more digital business landscape where bad actors can target valuable data. A study by IBM estimates that the average breach can cost a company $4.5 million. Hackers recently attached UnitedHealth, which could cost the company more than $1 billion. These highly public instances are almost like free advertising for security companies.
Today, SentinelOne is worth just $6 billion. The global cybersecurity market could grow to over $650 billion by decade's end. That's a lot of room for a cutting-edge product from SentinelOne to grow and take market share from old and new competitors. Consider SentinelOne an up-and-coming star that could be worth a lot more someday.
2. Opendoor Technologies
Real estate has proven to be arguably the most technology-resistant industry. Ask your elders about the homebuying process, and you'll probably hear a lot of familiar information.
Opendoor Technologies (OPEN +1.11%) is trying to change the game by turning homebuying into a delightful and convenient e-commerce experience. Opendoor pioneered iBuying, where companies directly buy and resell homes on the market.
NASDAQ: OPEN
Key Data Points
Opendoor's process is relatively straightforward. Homeowners can easily get an offer through Opendoor's smartphone app. Opendoor uses AI to evaluate and value the property. If accepted, the transaction can close in as little as 14 days.
The target market is virtually endless. Cumulatively, residential real estate in America is worth more than $50 trillion, and millions of homes change owners each year. Opendoor sold just under 19,000 homes last year. There is a ton of room to expand the business, and Opendoor is one of the few companies left after some competitors bowed out and partnered with Opendoor instead.
Even a small sliver of the total market can make Opendoor a company worth billions of dollars. Today, it's only worth $1.5 billion. It's among the riskiest stocks on Wall Street because mispricing homes could cause steep losses. But the upside is as high as any stock you'll come across.
3. Upstart
Consumer borrowing depends on a credit score, a long-standing standard invented in the 1980s. Upstart (UPST +3.67%) believes AI algorithms are a more modern way to originate loans and that its AI can better identify risky borrowers than a credit score can. The company originates loans using AI and then refers them to lenders in its partner network of more than 100 banks and credit unions.
NASDAQ: UPST
Key Data Points
Upstart publishes data that suggests lenders suffer 53% fewer defaults using the same approval rate as a credit score and that its AI is four times as effective at separating risky borrowers. However, the business hit a major snag as rising interest rates curbed institutional appetite for Upstart's loans. Unable to offload many loans, the business has dried up, and loans accumulated on Upstart's balance sheet.
Despite these challenges, there are a lot of long-term upsides here. Consumer lending is a massive market, and Upstart proved it could be very profitable before interest rates rose. A rate reversal could get the business back on track, making Upstart a risky bet with massive upside potential.
