2 Tech Stocks That Could Potentially Transform Your Portfolio

Investing in the stock market offers the possibility of turning a modest investment into a substantial fortune. However, it is essential to make informed choices and ensure that your portfolio is well-diversified. While it is impossible to predict with complete certainty which stocks will outperform, focusing on a selection of promising growth stocks can significantly enhance your chances of achieving remarkable returns.

With that in mind, here are two tech companies that show potential for long-term growth and investment returns.

1. C3.ai

The demand for enterprise artificial intelligence (AI) software is rising rapidly, making it a promising area for investment. According to Statista, the AI market is expected to expand at an annual rate of 27% through 2030, ultimately reaching a valuation of $826 billion. C3.ai (AI -4.50%) stands out as a leader in providing AI solutions for large organizations and government entities in the U.S., and its revenue growth aligns well with market predictions.

C3.ai has experienced consistent growth, with a remarkable 29% year-over-year increase in its most recent quarter, marking seven quarters of accelerating revenue. A critical factor contributing to its success is its strategic alliances with major cloud service providers, notably Microsoft, which has enhanced C3.ai's market potential. Recently, Microsoft has deepened its collaboration with C3.ai, which favors the company's growth outlook. In the last quarter, C3.ai inked 58 new agreements with companies like ExxonMobil, Coca-Cola, and various U.S. government agencies.

However, C3.ai faces challenges regarding its profitability. The company reported an adjusted net loss of $0.06 per share in the last quarter, which has a negative impact on its stock performance. Despite this, investors may find reassurance in the management's outlook, as they anticipate that revenue will outpace costs over the long term. If C3.ai achieves its goals, the stock could see substantial appreciation over the next decade.

Currently, C3.ai is a smaller player with $346 million in trailing revenue, but it has a solid financial position with $730 million in cash and short-term investments, which may help it navigate through rough waters. Investors who can deal with potential stock price fluctuations might find lucrative rewards in the future.

2. Shift4 Payments

Shift4 Payments (FOUR -2.05%) is another rapidly growing player in software and payment processing. Its primary markets include resorts, restaurants, and sports and entertainment venues, where it holds a competitive advantage as either a market leader or a close second.

The average quarterly revenue growth for Shift4 Payments has been an impressive 36% year-over-year over the last two years, indicating a significant growth opportunity. One of the primary drivers of this growth trend is the ongoing shift among merchants who prefer using a singular software system instead of multiple providers, which can lead to inefficiencies. Shift4 Payments addresses this problem by delivering a comprehensive system that encompasses payment processing, security, reporting, analytics, and more, all under one roof.

Through strategic acquisitions of companies with large customer bases, Shift4 Payments is building a durable competitive edge aimed at sustaining long-term growth. Once it acquires a business, Shift4 is well-positioned to offer bundled services to a vast number of new customers.

Although the company's acquisition strategy has resulted in a total of $2.8 billion in long-term debt, it still maintains $1.4 billion in cash, showcasing a strong balance sheet. Furthermore, Shift4 Payments is beginning to demonstrate improving profit margins, with a reported 56% year-over-year increase in net income, reaching $113 million, for the first three quarters of 2024.

The company's stock price has mirrored its growth, surging 86% over the past three years, and may promise years of compounding returns for investors. Currently, the stock is trading at a reasonable valuation of 22 times this year's earnings estimate, considering its rapid expansion in the payments sector.

Investing in these emerging tech stocks could be a strategic move for those looking to grow their wealth over time, as both companies are positioned within booming industries poised for significant growth.

investing, stocks, growth