2 Artificial Intelligence (AI) Stocks Trading Under $30 That Can Supercharge Your Portfolio | The motley fool

The semiconductor giant Nvidia has added $2.6 trillion to its market capitalization since the start of 2023, absorbing most of the value created by the artificial intelligence (AI) industry so far.

However, professional investor Cathie Wood believes that software companies will eventually generate $8 in revenue for every $1 spent on chips by Nvidia, which could create a significant opportunity for investors.

C3. him (HE -1.21%) AND Lemonade (LMND -0.24%) were developing AI software long before the buzz hit last year. Shares in both companies trade below $30; here’s why they can complement your stock portfolio for the long term.

1. C3. him

C3.ai was the world’s first venture AI company when it was founded in 2009. It now has a portfolio of more than 40 ready-made and customizable AI applications used by businesses in 19 different industries, which helps they reap the benefits of the technology without having to build it themselves from the ground up.

Dow is a chemical manufacturing giant that uses C3.ai applications for predictive maintenance. AI monitors Dow’s equipment to calculate the probability of a failure, allowing engineers to correct any problems before they become critical. Dow says C3.ai has reduced its downtime by 20%, which directly impacts production volume, revenue and profitability.

Similarly, Georgia Pacific (which produces paper, packaging and construction materials) has established C3.ai’s reliability platform to monitor over 200 large manufacturing assets, with plans to further expand the partnership. Georgia Pacific has already seen a 5% increase in equipment efficiency, and management says employees now spend 80% of their time solving problems instead of looking for them.

C3.ai sells its applications directly to businesses, but also sells them through its extensive partner network which includes all major cloud platforms such as Microsoft Azure and Amazon Web Services. These partners offer C3.ai’s applications to their customers to give them more AI options, and C3.ai benefits from access to a much larger set of businesses.

In the last fourth quarter of fiscal 2024 (ended April 30), C3.ai had 487 customer engagements, which was a whopping 70% increase from the year-ago period, highlighting the rapidly growing demand for AI in the world of corporations. The company’s revenue hit a record $86.6 million during the quarter, up 20%, its fastest growth in almost two years. According to management’s forecast, revenue growth could further accelerate to 23% in the next fiscal first quarter 2025 (ending July 31).

C3.ai is trading at $28.55 per share as of the close on June 27, an 82% discount to its all-time high from the tech frenzy of 2020. Its valuation was completely unreasonable at the time , but the company has grown steadily since then, with more customers and an expanding product portfolio. Now may be a good time to buy.

2. Lemonade

Lemonade has been developing artificial intelligence since it was founded in 2015 with the goal of disrupting the insurance industry, which is dominated by large, entrenched companies. Lemonade uses AI throughout its business; it autonomously writes quotes, pays claims, calculates premiums and even identifies areas where the company is underperforming.

Lemonade’s AI chatbot, Maya, can write quotes for potential customers in less than 90 seconds through the company’s website. His AI roti, Jim, can pay claims in less than three minutes without human assistance. This fast-paced, technology-focused approach to service has helped Lemonade attract over 2 million customers to date and is successfully gaining younger demographics in the 19 to 34 age group, which have historically been underserved.

Internally, Lemonade’s Lifetime Value (LTV) AI models use a range of data to calculate a customer’s likelihood of making a claim, switching insurers and purchasing multiple policies, to ensure it charges the premium more accurate.

Plus, these models help keep costs down. The company’s loss-adjusted expense (LAE) ratio — which measures the cost of managing claims — is 7.6%, while 10% is typical across the industry. In fact, Lemonade’s insurance book has grown 22% over the past year at the same time as the company reduced its workforce by 11%, which highlights the power of AI.

During the first quarter of 2024 (ended March 31), Lemonade’s premiums in force (total value of all active policies) reached a record $794 million, representing a 21.5% increase from the year-ago period. Its gross loss ratio (the percentage of premiums paid as claims) also fell eight percentage points to 79% and is now in line with the company’s long-term target of 75%.

These metrics resulted in record revenue of $119.1 million during the first quarter, up 25% from the year-ago period. Lemonade is still generating losses on the bottom line, but they are shrinking and management expects the company to be cash flow positive by the end of this year. However, the pullback in spending could lead to slower revenue growth and delay an expansion beyond the existing five segments: renters, homeowners, life, pet and auto insurance.

However, achieving profitability will be a key milestone that could give investors confidence in Lemonade’s ability to operate a thriving and sustainable business over the long term. Its shares closed at $16.46 on June 27, which was an 89% discount to its all-time high. Like C3.ai, Lemonade got caught up in the technology frenzy during 2021 and its valuation rose to unsustainable heights. With the company making clear progress since then, the big drop could be a great opportunity to buy the stock.