Artificial Intelligence (AI) Software Sales Could Soar 580%: 2 AI Stocks to Buy Now (Hint: Not Palantir)

Artificial intelligence (AI) is quickly weaving its way into daily life. According to Goldman Sachs, 9.2% of U.S. companies now use AI to produce goods and services, which is twice the percentage that used the technology at the same time last year. But the market is still in its early stages.

Morgan Stanley estimates AI software revenues will increase 580% in the next three years, topping $400 billion in 2028. While Palantir is well positioned to benefit, the stock carries a steep valuation. Investors should consider more reasonably priced stocks such as MongoDB (NASDAQ: MDB) and Okta (NASDAQ: OKTA).

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1. MongoDB

Databases are used to store, manage, and retrieve application data. MongoDB's document database handles structured and unstructured data, which differentiates it from traditional relational databases designed solely for structured data. To elaborate, structured data fits neatly into rows and columns, but unstructured data (e.g., images, videos, and text) does not.

The flexibility of the document model means MongoDB is especially well-suited for content management systems, e-commerce platforms, and artificial intelligence (AI) applications. MongoDB earlier this year leaned into the AI opportunity by acquiring Voyage AI, a company that develops embedding and reranking models that improve AI application accuracy.

CEO Dev Ittycheria told analysts, "As AI redefines how applications are built and how businesses operate, MongoDB is exceptionally well positioned. Real-world applications require high-quality, context-rich, and often unstructured data to deliver trustworthy outputs."

MongoDB's document model is also well-suited to real-time analytics applications, which are often used to personalize customer experiences across the internet. Consultancy Gartner recently ranked MongoDB as a leader in database management systems, mentioning its support for artificial intelligence and real-time analytics.

MongoDB shares currently trade at 49 times adjusted earnings. While that is not cheap, the valuation is reasonable for a company whose adjusted earnings increased 96% in the most recent quarter. Additionally, shares trade at 7.4 times sales, a material discount to the one-year average of 9.5 times sales and the three-year average of 13.4 times sales.

2. Okta

Okta is a cybersecurity company that develops identity and access management (IAM) software. Its platform lets administrators enforce contextual access policies that define which users and devices can connect to which applications and resources. It leans on AI to score risk with each login and authenticate accounts (including AI agents) based on criteria like identity, location, and behavior.

Importantly, Okta recently introduced a new product called Identity Threat Protection, an AI-powered tool that measures session risk. To elaborate, whereas login risk is calculated only one time during the authentication phase, session risk is determined continuously by analyzing every request post-authentication.

Okta has multiple tailwinds at its back. First, cybersecurity is a nondiscretionary budget expense because businesses cannot afford to suffer a data breach. Second, identity-based attacks account for 30% of cybersecurity incidents, and the identity market is projected to grow at 12.6% annually through 2030 as AI creates new threats. Third, industry analysts recently ranked Okta as a leader in workforce identity (for employees) and customer identity.

Okta shares currently trade at 33 times adjusted earnings. That is quite reasonable for a company whose adjusted earnings increased 32% in the most recent quarter. Additionally, shares currently trades at 6.6 times sales, roughly in line with the three-year average of 6.5 times sales. The stock fell after the recent earnings report because management provided cautious guidance. Patient investors should lean into that opportunity.

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Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Goldman Sachs Group, MongoDB, Okta, and Palantir Technologies. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.