Artificial intelligence (AI) has taken the world by storm over the past year. Demand for Generative artificial intelligencewhich can create intelligent responses, images and videos from simple text instructions, is thriving and expected to grow exponentially in the coming years.
Some of the most widely used generative AI applications are OpenAI’s ChatGPT, Google’s Gemini, and Microsoft Co-pilot. ChatGPT has more than 200 million weekly active users, but overall, the generative AI market could increase about 10-fold to reach $356 billion by 2030, according to Statista.
Here are two stocks to capitalize on this opportunity.
1. Soundhound AI
One area where demand for generative AI is growing is conversational voice assistants Soundound Amnesty International (NASDAQ:VOICE) He stands out as a leader. The company is seeing strong demand from automakers for Soundhound Chat AI, its conversational AI assistant. But the company aims to expand into more industries.
Soundhound has also gained a strong foothold in the restaurant industry. More restaurants are starting to approach Soundhound about its product rather than the other way around, which is a great validation of the company’s technology. Over the past three years, Soundhound’s quarterly revenue has doubled. Revenue grew 54% year-over-year to $13.5 million in the second quarter.
Soundhound just acquired Amelia, a leading AI software company, for $80 million. The deal opens up more industries for Soundhound to expand into, including healthcare, financial services, smart devices and retail.
The stock has risen in value over the past year, but the main negative remains uncertainty over Soundhound’s profitability. Revenues are booming, but they still aren’t reporting profits. The company’s adjusted net loss was $14.8 million in the fourth quarter.
However, Soundhound spends a lot of money on marketing, which reduces its bottom line. The company spent 42% of its revenues on marketing in the last quarter, but this percentage is gradually decreasing, which can be attributed to the growing awareness of the capabilities of voice artificial intelligence. Looking into the future, marketing expenses can become a source of profit.
For these reasons, the stock, which is up 189% over the past year, is still worth buying. Investors are getting in on the ground floor of a small business Artificial Intelligence Stocks Which could rise alongside the generative AI market over the next decade.
2. Nvidia
Nvidia (Nasdaq: NVDA) It has been the preferred chip supplier for people who play video games for a long time. But in recent years, Nvidia’s graphics processing units (GPUs) have been used to mine cryptocurrencies, run cloud services in data centers, and train artificial intelligence models. This has allowed Nvidia to translate its dominance in gaming GPUs into similar leadership in the AI chipset market.
Nvidia’s GPUs are used by every major cloud provider. It now works with some of the world’s largest companies on AI initiatives. The company’s revenue has soared over the past year, up 122% year-over-year in the most recent quarter. The main driver of this demand is the increasing investment in the development of AI-powered chatbots and AI co-pilots.
One risk Nvidia faces is increased competition from custom AI chip makers. However, Nvidia’s consistent innovation should protect its lead and keep its momentum going. And last quarter, Nvidia released Inference Microservices (NIM), which is used by more than 150 companies to accelerate the development of generative AI applications. Nvidia also announced a new AI foundry service with Meta platformsThe Llama family of large language models, which will enable countries and organizations to use their proprietary data to create custom models and AI applications.
Nvidia is well-positioned for growth on the hardware side with its GPUs, but software represents an overlooked opportunity. For example, AT&T Saw 70% cost savings after using Nvidia NIMs to transcribe and classify AI calls. Nvidia expects software and support services revenue to reach an annual run rate of nearly $2 billion by the end of the year.
Although it’s up nearly 200% over the past year, the stock’s forward price-to-earnings ratio based on next year’s earnings estimates is 30, which isn’t expensive for a leading AI chip company. While investors shouldn’t expect the stock to rise as quickly as it has in the past few years, Nvidia investors can expect the stock to continue to reach new highs over the long term.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Ballard He has positions at Meta Platforms, Nvidia, and SoundHound AI. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has Disclosure policy.
Generative AI Explodes: 2 Great Stocks to Buy Now Originally published by The Motley Fool