As the winds of the stock market shift towards artificial intelligence (AI), investors are eagerly eyeing the skies for the next multi-baggers. The AI sector, akin to a thunderstorm on a summer day, has been electrifying the market, with stocks related to AI experiencing exponential gains. While skeptics may call it a bubble, savvy investors are recognizing the potential of these stocks as smart investments.
In the grand theater of growth investing, AI companies are poised to steal the show with the potential to become long-term champions. Similar to the success stories of software-as-a-service (SaaS) and cloud-based companies, AI stocks are only at the cusp of what could be a prolonged uptrend. Let’s delve into three AI stocks that have already demonstrated their prowess this year and examine why their journey may be far from over.
Nvidia (NVDA)
Fortune favors the bold, and in the realm of AI, Nvidia (NASDAQ:NVDA) stands as a titan, spearheading the AI revolution it helped birth. Founded in 1993 by the visionary CEO Jensen Huang, Nvidia’s stock, as per Yahoo Finance, is under the watchful eye of 46 analysts, with price targets ranging from $478.40 to $2,762.14. The average target of $973.12 mirrors the current stock price, hinting at further potential.
Nvidia has ascended nearly twofold since the dawn of 2024, now proudly claiming the mantle of the world’s third-largest company by market capitalization. Its recently unveiled Blackwell B200 GPU, touted as the most potent chip globally, has already driven pre-orders into 2025. These AI marvels promise data processing speeds 30 times faster while utilizing a mere fraction of power.
Despite its meteoric rise, Nvidia trades at a modest 39x forward earnings, a testament to its undervalued status amidst the turbulent price swings. This underlines the fact that Nvidia may not just be keeping up with the storm but leading the charge ahead.
Advanced Micro Devices (AMD)
As the younger sibling to Nvidia, Advanced Micro Devices (AMD) has been a prodigy in the semiconductor arena since its inception in 1969. Helmed by the formidable Dr. Lisa Su, AMD commands a broad price target range of $60.00 to $270.00 per share, with an average target of $190.75, hinting at an upward trajectory from its current standing.
Traditionally known for CPUs, AMD swiftly carved a niche market from Intel and has now set its eyes on the AI realm. Its GPUs are vying for supremacy with Nvidia, finding favor with tech giants like Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), and OpenAI.
Trading at a premium to Nvidia, AMD boasts a 53x forward earnings multiple and a nearly 13x sales ratio. With a robust 3-year revenue compounded annual growth rate (CAGR) of 32%, AMD’s future potential to outpace its current premium valuation looms large on the horizon.
Soundhound AI (SOUN)
Unfamiliar yet promising, Soundhound AI (NASDAQ:SOUN) emerges as a prospective contender in the AI saga, with Nvidia as its illustrious benefactor. Despite recent analyst downgrades, the average price target of $7.15 hints at untapped reservoirs of growth for this budding AI entity.
Specializing in AI-powered voice products akin to Amazon’s Alexa and Apple’s Siri, Soundhound’s alliance with Nvidia, holding over 1.7 million shares, has sparked excitement. Boasting an enviable clientele list including Mercedes-Benz (OTCMKTS:MBGAF), Netflix (NASDAQ:NFLX), Honda (NYSE:HMC), and Mastercard (NYSE:MA), Soundhound stands as the dark horse in this AI race.
Of the trio, Soundhound emerges as the boldest investment, embodying both risk and reward in equal measure. Priced at 30x sales and facing tech giants as rivals, Soundhound’s bet on future success, backed by Nvidia and top-tier clients, may hold the key to the grandest returns.