We recently published a list of 10 Best Mid Cap AI Stocks to Buy Now. In this article, we are going to take a look at where SentinelOne, Inc. (NYSE:S) stands against other best mid cap AI stocks to buy now.
In 2025, the technology companies continue to focus on developing AI platforms that meet their enterprise customers’ needs for optimized performance, profitability and security, says Morgan Stanley. In doing so, they have been partnering throughout the AI ecosystem of chips companies, hyperscalers, large language models, and data and software companies while grappling with the US trade policy unknowns and resource constraints. The firm believes that the top trends in new AI frontiers and the emphasis on enterprises consist of AI reasoning, cloud migrations, custom silicon, systems to measure AI efficacy, and developing an agentic AI future.
Key Themes Likely to Shape the Industry
Morgan Stanley, while quoting executives from companies designing and making chips, stated that AI reasoning happens to be one of the biggest drivers of higher compute demand, and thus, semiconductors. Notably, AI reasoning goes over and above the basic understanding and into advanced learning and decision-making, which needs additional compute for pre-training, post-training, and inference. As per Marco Lagos Morales (Head of U.S. Semiconductor Investment Banking at Morgan Stanley), for chip companies, customer demand remains in the breadth of AI workloads for programmable infrastructure.
The next theme revolves around LLMs seeing potential in AI reasoning for enterprises. Morgan Stanley highlighted that companies that have developed the world’s biggest LLMs focus on using the most effective chips and building the best software to provide AI services that become critical for companies and consumers. As per LLM executives, while the early use cases for LLMs revolved around content generation, summarization, and classification, the biggest untapped potential is in AI reasoning for the enterprise data.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Software Companies Focusing on Agentic AI, Says Morgan Stanley
The software executives mentioned regarding their current use of AI for the purposes of productivity gains in marketing and engineering and their longer-term prospects in a bid to gain market share in an agentic computing future. Morgan Stanley further highlighted that such companies continue to aim to create large systems deploying AI agents to make decisions, take autonomous actions, and adapt to dynamic environments for real-world applications throughout various industries. According to Brittany Skoda, Global Head of Software Banking, software companies continue to compete to create larger operating systems that harness machine learning, natural language processing, LLMs, GenAI, and decision-making algorithms to move towards an agentic future.
Our Methodology
To list the 10 Best Mid Cap AI Stocks to Buy Now, we used a screener and sifted through several media reports to shortlist the mid-cap companies catering to the AI industry. Next, we selected the stocks that are the most popular among hedge funds. We have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Important AI Announcements for Investors
SentinelOne, Inc. (NYSE:S)
Market Cap as of March 27: $6.1 billion
Number of Hedge Fund Holders: 47
SentinelOne, Inc. (NYSE:S) operates as a cybersecurity provider. Its Singularity Platform provides AI-powered autonomous threat prevention, detection, and response capabilities throughout an organization’s endpoints, cloud workloads, and identify credentials, resulting in seamless and autonomous protection against a spectrum of cyber threats. The increased sophistication of cyber threats resulted in higher demand for advanced, AI-powered security solutions. SentinelOne, Inc. (NYSE:S)’s core strength revolves around its AI-driven architecture, placing it well to capitalize on this trend. With companies looking for effective ways to detect and respond to threats in real-time, the company’s Singularity Platform can see higher adoption.
Furthermore, SentinelOne, Inc. (NYSE:S)’s investments in emerging technologies such as Purple AI and Cloud Native Security remain in line with broader market trends. Such innovations can fuel increased customer engagement and upsell opportunities, enhancing the company’s revenue growth and market share gains. SentinelOne, Inc. (NYSE:S) remains on track to exceed $1 billion in ARR and revenue this year. For over a decade, the company has patented leading machine learning security models — now, it focuses on pioneering fully autonomous, agentic AI workflows.
Baron Funds, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“We are huge believers in the practical uses of AI, and we have several investments in companies that adapt AI models to enhance their products and services. These include companies like GitLab Inc., Sentinelone Inc. (NYSE:S), and Couchbase, Inc., which were among our top detractors at one point in the second quarter (GitLab and SentinelOne recovered significantly in the last week of the quarter). As of the second quarter at least, the market has just not been ready to reward AI companies beyond those providing “picks and shovels.” This led to all three of these companies trading at or near all-time low valuation levels during the quarter. Nevertheless, we believe that in the coming quarters the market will broaden its level of interest from AI hardware to “adaptive AI” investments like GitLab, SentinelOne, and Couchbase. In that scenario, all three of these stocks have significant upside potential.
GitLab is a subscription software company that enables enterprise software developers to develop new software applications rapidly and securely for their firms. GitLab uses AI to help with code suggestions, to check for holes in security, and to automate collaboration among the many developers within an enterprise. GitLab recently launched a product called Duo that we believe will provide revenue upside for the company and enhance the competitiveness of their product of offerings. SentinelOne is a cybersecurity company that provides endpoint protection (a much more advanced version of legacy “anti-virus” software) both at customers’ physical sites and in the cloud. It uses AI to detect anomalous behavior on the network and to automate the remediation of the security flaws that led to the intrusion. Both companies are recurring revenue entities, with high gross margins (78% for SentinelOne and 90% for GitLab) and are growing rapidly (revenue growth of 25% or more). Yet both are trading at or near all-time low valuation levels. SentinelOne slightly beat full-year revenue guidance but guided to an operating loss that was $7.5 million worse than consensus (entirely accounted for by the increased operating expense pulled in from acquisitions – including PingSafe which allows SentinelOne to scan cloud-based workloads without the need to install a software agent). This led to a one-day stock drop of as much as 31% which we attribute purely to market skittishness. By quarter end, SentinelOne’s shares had fully recovered. We believe the company can grow revenues by 25% from 2024 through 2028 and that free cash flow will go up over 10-fold in this period. We see the stock at least doubling from its current price.”
Overall, S ranks 3rd on our list of best mid cap AI stocks to buy now. While we acknowledge the potential of S as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than S but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
