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3 Software Stocks That Could Make You a Millionaire

In Business
June 04, 2024

Do you want to get rich? Obviously professional athletes and entertainment icons are doing well for themselves. But, not everyone has enough talent to become either one.

Fortunately for the rest of us, it’s still possible to become a self-made millionaire even with just an ordinary income. The key is finding, buying, and then holding the right stocks. It’s also worth mentioning that technology stocks have dished out a larger share of long-term gains. And that makes sense. These underlying companies are introducing the world’s most revolutionary advances, after all.

Here’s a closer look at three software stocks — a subset of the tech sector — that could help make you millionaire if you’re willing to give them enough time.

1. C3.ai

You’re probably aware of the recent rise of several artificial intelligence (AI) platforms like ChatGPT, Google’s Gemini (formerly Bard), or what Microsoft (NASDAQ: MSFT) now refers to as Copilot. You may have even tinkered with some of these tools yourself just to see what they can do. And if you have, you’ve likely been casually impressed.

What you’ve probably not seen, however, is a practical, widespread commercial use for generalized AI-powered chatbots.

Just understand that platforms like ChatGPT or Gemini aren’t the only artificial intelligence tools available. There are higher-level, business-oriented AI platforms out there that are already generating revenue.

C3.ai (NYSE: AI) is one of the bigger names behind such enterprise-caliber solutions. And it’s had no problem selling them. Oil and gas giant Shell, for instance, uses C3’s tech to predict which pieces or components of its physical infrastructure need maintenance, meaning less downtime due to surprise failures. The U.S. Air Force employs a similar program aimed at ensuring more of its aircraft remain airworthy. The company’s software was even used to help combat the COVID-19 pandemic.

The thing is, most enterprise customers are still just learning about the full potential of artificial intelligence, and what all it can do. Most of this business’s growth is ahead rather than behind it. Precedence Research predicts the global AI software market is set to grow at an annualized pace of 23% through 2032, as more and more organizations begin paying for access to such tools. C3’s top line is expected to grow to the tune of 23% this year, and another 22% next year.

Yes, the company’s recent post-earnings surge makes the idea of stepping into the stock now a little bit intimidating. Don’t be intimidated though. C3 shares are still much nearer their all-time lows hit in late 2022 than their all-time highs reached in late 2020. There’s still plenty of room for more upside.

2. Palo Alto Networks

For almost as long as personal computers have existed, criminals have sought to exploit their vulnerabilities. And, for as long as computers and the networks they’re a part of are going to exist into the future, nefarious folks will continue exploiting them.

The growing usage of computers (and smartphones) is actually creating more chances for cybercrime to be committed. According to the United States’ Federal Bureau of Investigation reports of online fraud were up 10% last year, leading to a 22% increase in monetary losses. All told, the FBI estimates 2023’s cybercrime losses reached $12.5 billion in the U.S. alone.

Enter Palo Alto Networks (NASDAQ: PANW). It’s one of the outfits helping the world defend from digital threats. Firewalls, Internet of Things (IoT) support, malware defense, data protection, and secure remote logins are just some of the services in its lineup. And it’s good at what it does. Technology market research outfit Gartner rates its endpoint protection platform as one of the best ones available, for instance.

Anyone keeping tabs on this company and/or this stock likely knows this superiority hasn’t mattered much of late. While shares were deep into record-high territory in February immediately before the release of the company’s fiscal Q2 results, dialed-back top-line guidance for the full year spooked investors, leading to a sharp post-earnings plunge. The stock’s recovery effort since then hasn’t gotten much traction.

Take a step back and look at the bigger picture, though. This company’s revenue is still expected to improve by 16% this year, and then another 14% next fiscal year, with comparable growth in the cards at least through 2028. Earnings are expected to grow at an even faster clip for the time frame. That’s a bit faster than the near-10% yearly growth Inkwood Research foresees for the worldwide cybersecurity business through 2032. But Palo Alto Networks is positioned to capture more than its fair share of this growth.

3. Microsoft

Last, but certainly not least, add Microsoft to your list of millionaire-making software stocks.

It’s an oldie but a goodie. Microsoft is, of course, the original titan of the software market. Its Windows operating system is a key reason personal computers began becoming commonplace back in the 1990s, although its personal productivity and entertainment software certainly helped usher in the PC era.

Microsoft is now also the name behind the Bing search engine, owns LinkedIn, offers cloud computing infrastructure services, and makes the Xbox video game console — just to name a few of its other ventures.

It’s still predominantly a software company, however, and an important one. Data from GlobalStats indicates that its Windows operating system is installed on nearly three-fourths of the world’s personal computers. Its office productivity software like Word and Excel still enjoy a great deal of market share.

It’s the way the software business is changing though — and the way Microsoft is changing with it — that makes this stock such a must-have for most portfolios.

See, rather than outright buying and installing software out of a box (from a disc) on a one-time basis, more and more consumers and corporations are “renting” access to cloud-based versions of these programs. Although these monthly and annual subscription fees are relatively modest, that’s actually a competitive advantage. That’s because their cost is low enough that customers willingly stick with these subscriptions for a long, long time. This lowers the company’s ultimate marketing costs while at the same time raising the reliability and predictability of its revenue.

That being said, perhaps Microsoft’s most meaningful growth engine is the one that’s seen the least. That’s its cloud computing business. Although the company’s still trailing Amazon‘s cloud market share of 31%, numbers from Synergy Research Group indicate Microsoft’s cloud computing business is growing faster than any other provider’s. And with a 24% share, it’s not inconceivable that Microsoft could become the world’s top cloud service provider in the foreseeable future.

Should you invest $1,000 in Microsoft right now?

Before you buy stock in Microsoft, consider this:

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, and Palo Alto Networks. The Motley Fool recommends C3.ai and Gartner and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

3 Software Stocks That Could Make You a Millionaire was originally published by The Motley Fool

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