History Says the Nasdaq Will Soar: 2 Artificial Intelligence (AI) Stocks to Buy Now, According to Wall Street

Anticipating short-term stock market movements is challenging, but leaning into long-term trends can be a powerful investing strategy. The Nasdaq Composite, a benchmark heavily weighted towards technology stocks, has demonstrated remarkable growth over the past two decades, compounding at an impressive 12% annually. This period spans a wide variety of market and economic conditions, suggesting that similar returns are quite plausible looking ahead. The ongoing rise of artificial intelligence (AI) is expected to serve as a significant tailwind for the technology sector, potentially fueling further growth.

In this environment, Wall Street analysts are identifying specific AI-related companies poised for substantial gains. Here, we explore two such stocks recommended by analysts, highlighting why they believe these companies are strong buys now.

AppLovin: Adtech Innovation Driven by AI

AppLovin operates in the adtech space, providing software that empowers developers to effectively market and monetize their applications across mobile and connected TV platforms. What sets AppLovin apart is its sophisticated AI engine, named Axon. Axon is designed to optimize advertising campaign results by intelligently matching advertiser demand with the most relevant publisher inventory.

The company has made significant investments in developing its Axon engine. Notably, AppLovin strategically acquired video game studios years ago to gather data and train the underlying machine learning models that drive its targeting optimization capabilities. These continuous upgrades have encouraged media buyers to increase their spending on the platform over time, demonstrating the effectiveness of the technology.

Analysts have recognized AppLovin's strength. Morgan Stanley analyst Brian Nowak highlighted AppLovin as the "best executor" in the adtech industry, specifically praising its superior ad targeting, which is powered by its "best-in-class" machine learning engine. This technological edge has contributed to AppLovin's outperformance compared to the broader in-app advertising market since 2023.

Recent financial results underscore AppLovin's strong performance. In the first quarter, revenue grew by a robust 40% year over year to $1.4 billion. This growth was primarily driven by strong sales increases in the advertising segment, which more than offset a decline in the mobile games segment. GAAP net income saw an even more dramatic increase, jumping 149% per diluted share. Management has provided optimistic guidance, projecting 69% advertising sales growth in the second quarter.

Looking ahead, Wall Street analysts estimate that AppLovin's earnings will increase at a rapid pace, projected to grow at 53% annually through 2026. Considering this growth trajectory, the current valuation of 61 times earnings is seen by many as quite inexpensive. For investors seeking exposure to innovative adtech fueled by advanced AI, AppLovin presents a compelling opportunity. A pragmatic approach could involve starting with a modest position and gradually adding shares over time.

MongoDB: The Foundation for Modern AI Applications

MongoDB is a leader in the world of databases, specifically known for its document-oriented database model. This model offers significant advantages over traditional relational (SQL) databases, primarily in its scalability and flexibility. Unlike SQL databases that organize data strictly into rows and columns, the document model can handle both structured and unstructured data types with ease. This adaptability makes it particularly well-suited for modern applications, including those involving analytics, content management, e-commerce, payments, and crucially, artificial intelligence.

Recognizing the increasing demand for databases capable of powering AI, MongoDB has actively invested in this area. Last year, the company launched MAAP (MongoDB AI Application Program), a suite of resources and reference architectures designed to help developers build applications with integrated AI capabilities. More recently, MongoDB acquired Voyage AI, a company specializing in embedding and reranking models. These models are vital for enhancing the accuracy and reliability of AI applications, particularly in tasks like information retrieval and understanding context.

According to CEO Dev Ittycheria, MongoDB is uniquely positioned to support modern AI-powered applications by bringing together three essential components: real-time data, powerful search capabilities, and smart retrieval mechanisms. By integrating these features into a single platform, MongoDB significantly simplifies the development process for creating intelligent and responsive applications, eliminating the need for developers to piece together multiple disparate systems.

MongoDB's recent first-quarter financial results were encouraging, surpassing analyst expectations for both revenue and earnings. The company expanded its customer base by 16%, reaching 57,100, marking the highest net customer additions in six years. Revenue increased 22% year over year to $549 million, showing a sequential acceleration. Non-GAAP earnings per diluted share saw substantial growth, climbing 96%.

Market research suggests continued strong growth in the database management system market, with Grand View Research estimating a 13% annual increase through 2030. As a leader in the flexible document database space, MongoDB is well-positioned to continue gaining market share and is expected to grow faster than the overall market. From a valuation perspective, the current price-to-sales ratio of 7.8 times sales appears reasonable, especially when compared to its three-year average of 13.2 times sales. For patient investors looking for a foundational technology supporting the AI revolution, establishing a small position in MongoDB today could be a prudent move.

Both AppLovin and MongoDB represent compelling opportunities within the technology sector, benefiting directly from the powerful trend of artificial intelligence. Their recent performance, strategic initiatives, and favorable analyst sentiment suggest they are well-equipped to contribute to the Nasdaq's expected continued ascent.