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An updated edition of the February 14, 2025 article.
Artificial Intelligence (AI) enables machines to process vast amounts of data, recognize patterns and make autonomous decisions. AI is revolutionizing industries such as robotics, healthcare, finance, cybersecurity and e-commerce with its ability to mimic human intelligence through machine learning, deep learning and natural language processing. AI is gaining proliferation thanks to multimodal learning and growing context awareness. The emergence of Generative AI (Gen AI) and Agentic AI has further enhanced AI’s capabilities, making it a key driver of efficiency, automation and innovation.
Agentic AI is delivering sophisticated agents that can reason, plan and even learn from customer interactions. Search giant Alphabet GOOGL is infusing AI into its search business. Gen AI is helping businesses and federal government agencies accurately and efficiently search datasets through the usage of semantic search, automated metadata tools, and advanced document transcription. AI is helping enhance security by automating threat detection, analyzing vast amounts of data and responding to incidents quickly. This bodes well for cybersecurity providers like Okta OKTA.
With AI adoption accelerating, global spending on AI infrastructure is projected to soar. U.S. tech giants, including Microsoft MSFT, Amazon AMZN, International Business Machines IBM, Google and Meta Platforms META, have been at the forefront of bringing remarkable advances to the AI technology well, supported by powerful AI chips from NVIDIA NVDA. META alone plans to spend between $60 billion and $65 billion in capital expenditures on AI in 2025. OpenAI, SoftBank and Oracle, along with the Trump administration, announced the Stargate joint venture, which intends to invest $500 billion over the next four years in building new AI infrastructure.
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Meta Platforms’ focus on leveraging AI to improve user engagement has been a key catalyst. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.35 billion daily users. This Zacks Rank #2 (Buy) company’s staggering reach makes META one of the most important players in the digital ad sales market, alongside Alphabet. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meta AI usage continues to increase, with more than 700 million monthly actives. The company’s initiative to add updates that will help Meta AI deliver more personalized and relevant responses is expected to boost engagement. Meta AI’s availability in six European languages is noteworthy. META is spending hugely on expanding AI infrastructure, with capital expenditure expected between $60 billion and $65 billion. (Read More: META Starts Testing Community Notes: Should You Taste the Stock?)
Higher advertising revenues have been a key catalyst in driving META’s prospects. The company is leveraging its proprietary machine learning system, Andromeda, for retrieval in ad recommendations. The system is powered by NVIDIA’s Grace Hopper Superchip and Meta Training and Inference Accelerator hardware. Andromeda improves the performance of the company’s advertising system by delivering more personalized advertisements to viewers.
IBM is benefiting from healthy demand trends for hybrid cloud and AI. This Zacks Rank #2 company is seeing strong growth in its Gen AI offerings, including watsonx. IBM’s AI portfolio is suitable for all kinds of customers, not only using their own models but also IBM’s, as well as open models from Hugging Face, Meta Platforms and Mistral. (Read More: IBM Soars 32% in the Past Year: Should the Stock Be in Your Portfolio?)
IBM’s Gen AI book of business has grown to more than $5 billion since inception, up by roughly $2 billion quarter over quarter. Approximately one-fifth of this book of business comes from software, and the remaining four-fifths is Consulting. IBM’s Granite models designed for specific purposes are 90% more cost-efficient than larger alternatives. RHEL AI and OpenShift AI are offering IBM customers a consistent and scalable AI foundation built on open-source technology. In infrastructure, the Telum II processor enhances IBM Z’s AI capabilities and performance.
IBM’s expanding partner base, which includes AMD, Palo Alto Networks, SAP, Amazon, Microsoft, and CoreWeave, is a key catalyst.
Another Zacks Rank #2 company, Okta, is benefiting from an innovative portfolio that is helping it win clients. Okta’s offerings include Okta AI — a suite of AI-powered capabilities embedded across several products — which empowers organizations to harness AI to build better experiences and protect against cyberattacks. Okta Platform and Auth0 Platform are compatible with public clouds, on-premises infrastructures and hybrid clouds. (Read More: Does OKTA's Strong Portfolio Make it the Best Security Stock to Buy?)
OKTA exited the fourth quarter of fiscal 2025 with 19,650 customers. Customers with more than $100 thousand in Annual Contract Value (ACV) increased 7% year over year to 4,800. Okta added 25 customers with $1 million-plus ACV in the reported quarter. Okta Identity Governance has been gaining traction with more than 1300 customers and $100 million in ACV.
Okta is benefiting from a rich partner base that includes the likes of Amazon Web Services (AWS), CrowdStrike, Google, LexisNexis Risk Solutions, Microsoft, Netskope, Palo Alto Networks, Plaid, Proofpoint, Salesforce, ServiceNow, VMware, Workday, Yubico and Zscaler. In the fourth quarter of fiscal 2025, OKTA surpassed over $1 billion in aggregate TCV through its partnership with AWS. In fiscal 2025, revenues from the AWS marketplace jumped more than 80%.