AI stocks remain hot, although it’s clear that many companies expect sales to start to cool off. The initial wave of AI buying will likely be over by the end of next year. That still offers investors plenty of time to make a little more out of big hardware plays.
But it also suggests that investors may fare better investing with software companies. That’s because software tends to be a high-margin product.
Even better, many software services generate recurring revenues through monthly billing. Wall Street loves to see that kind of consistency.
That’s why companies like Salesforce (CRM) could be a big winner moving forward. They already beat handily on earnings and revenue expectations, and adding more AI features to their software could justify increasing prices well into the future.
More AI-related opportunities could also help Salesforce push its profit margins past the current 15% level.
Action to take: With CRM posting double-digit revenue and earnings growth, shares could continue the trend higher they’ve been making since May.
Investors can play the current momentum higher in the months ahead. Plus, Salesforce also recently started paying a dividend, with a yield of 0.6%.
For traders, more upside in the months ahead looks likely. The December $280 calls, last trading for about $11.20, could see mid-double-digit returns and far outperform shares over the next few months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.