Spending on Generative Artificial Intelligence Software Could Surge 6260%: 1 AI Growth Stock to Buy Now and Hold for the Long Term

Bloomberg Intelligence projects that sales of generative artificial intelligence (AI) software will grow from $5 billion in 2023 to $318 billion in 2032, at a compound annual growth rate of about 591 TP3T. In other words, the generative AI software market will soar by 62,601 TP3T during this period.

Investors looking to benefit from this tremendous opportunity should build a basket of AI stocks today. Here's howHubSpot (NYSE: HUBS)Reasons worth investing in.

HubSpot's Customer Relationship Management Software is Popular with Small and Medium-Sized Businesses

HubSpot offers customer relationship management (CRM) software. Its platform includes productivity applications for曏 marketing, sales and customer service teams, as well as payment and content solutions. These products help organizations attract prospects, convert prospects into customers, and maintain lasting relationships with those customers.

HubSpot started as a marketing software in 2006, and it remains its core competency. Consulting FirmsGartner (name)HubSpot was recently recognized as a leader in marketing automation software, in part because of its focus on inbound marketing strategies and artificial intelligence (AI) investments. In context, inbound marketing is about bringing potential customers to a brand through useful content (e.g., informational articles), while outbound marketing is about bringing potential customers to a brand through traditional advertising.

Inbound marketing is more cost-effective because it generates fewer leads, but higher quality simply because the content is designed to be found by customers who are already interested in the topic. As a result, inbound marketing is attractive to small and medium-sized businesses (SMBs), and HubSpot further caters to this underserved niche with simple software and free pricing.

The company has been successful in this strategy. According toMorningstarHubSpot has not only expanded into a full CRM platform, but has also earned a leadership position in selling automation software to companies in the mid-Beijing market, according to analysts at HubSpot. Additionally, G2, a peer-reviewed research firm, ranked HubSpot as the best software seller in 2023 across all product categories, based on high customer satisfaction scores and strong market presence across multiple CRM product categories.

HubSpot Is Using Generative AI to Enhance Its CRM Software

Last September, HubSpot announced the launch of a suite of platform-wide AI capabilities, which have been slowly gaining popularity. These features include generative AI assistants, virtual agents, and predictive AI insights, all of which are designed to accelerate the productivity of marketing, sales, and customer service teams. Below are examples by CRM category.

• Marketing: AI assistants can create media content and draft text on web pages, blogs, social media and email.

• Sales: AI assistants can draft and mass collect e-mails; predictive AI tools can forecast sales, generate transaction health scores, and identify action items.

• Customer Service: An Artificial Intelligence Assistant can answer questions and summarize the contents of a conversation; a Virtual Agent can repeat customer support inquiries.

HubSpot also launched an AI chatbot called ChatSpot that uses natural language to automate tasks such as updating CRM contacts, drafting emails, and creating customized reports for sales, marketing, and customer service teams.

HubSpot has embedded artificial intelligence across its four product tiers - Free, Entry, Professional and Enterprise. The most advanced features validate the Professional and Enterprise products, helping the company upsell existing customers and attract more mid-sized businesses to its CRM software.

HubSpot is worth investing in right now

HubSpot announced solid financial results for the fourth quarter, beating expectations on both the top and bottom lines. Revenue increased 241 TP3T to $582M, primarily due to a 231 TP3T climb in customer count, but average subscription revenue per customer also increased by 1 percentage point. At the same time, non-GAAP (adjusted) net revenue increased 531 TP3T to $98 million.

We remain focused on SMEs, which is a very important market," Yamini Rangan, mat chief executive officer, told analysts on an earnings call:

Rangan also said that HubSpot will continue to introduce AI capabilities and more complex functionality to its CRM platform to create new monetization opportunities.

Wall Street expects the company to grow sales at an annualized rate of 17% over the next five years, and I think there's room for that expectation to rise if HubSpot is particularly successful in driving the adoption of more complex AI features that are matched by more expensive product tiers. But even if the Wall Street consensus is correct, the current valuation of 14.4 times sales seems reasonable. For long-term investors, now is a good time to buy into this growing stock in a small way.

Finally, onAlphabet Rumors of a possible acquisition of HubSpot are swirling around the Internet. As my colleague Danny Vena explained, while the deal is plausible, it's far from foolproof, and it's likely to come under intense scrutiny by the Securities and Exchange Commission. Investors should therefore ignore these rumors for the time being.

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Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors.Trevor Jennewine has no position in any of the stocks mentioned above.The Motley Fool recommends Alphabet and HubSpot.The Motley Fool recommends Gartner.The Motley Fool has a disclosure policy. The Motley Fool has a disclosure policy.

Spending on Generative AI Software Could Surge 6260%: 1 AI Growth Stock to Buy Now or Hold for the Long Term was originally published by The Motley Fool.