Every decade seems to bring a new wave of growth stocks that take advantage of the latest trends in the economy. The past two decades have created enormous wealth for investors who jumped on the e-commerce boom early (Amazon), video streaming (Netflix), and electric cars (Tesla). Artificial intelligence (AI) is all about the next wealth-building opportunity in the stock market.
According to Statista, the AI market is expected to grow from $184 billion in 2024 to $826 billion in 2030. Here are two stocks that many investors might wish they had bought in another twenty years.
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AI-powered voice assistants are starting to gain widespread adoption for things like customer service and smart ordering, but it could create many new use cases in electric cars and other markets over the next decade. SoundHound AI (NASDAQ: SOUND) is emerging as a leader in this market. It is a relatively small company that is experiencing rapid growth.
SoundHound has rolling revenues of $67 million, setting the stage for explosive returns in the coming years as more companies adopt the technology. Third quarter revenue grew 89% year-on-year, partly boosted by the recent Amelia acquisition, but was already reporting high growth before that, with revenue up 54% year-on-year in the second quarter.
SoundHound is expanding its customer base beyond its focus on automotive and restaurants to other markets such as retail, healthcare and banking. This will significantly expand the addressable market and help the company scale to improve margins. Last year, SoundHound’s five largest customers made up more than 90% of revenue, but now represent less than a third.
Another encouraging sign about SoundHound’s growth prospects is its list of partnerships with other leading technology companies. NvidiaSamsung, OracleAnd ServiceNow are among the companies collaborating with the AI Voice Leader.
The main negative against SoundHound AI is a lack of profitability, but this is not unusual for a small tech company. Management expects the company to achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of 2025, which will be a catalyst for the stock price. Investors have the opportunity to get in on the ground floor before Wall Street takes notice of this emerging growth story and bids the stock price higher.
Advanced micro devices (NASDAQ: AMD) Its shares have tripled in the past five years as it gained market share Intel. AMD is a leading provider of central processing units (CPUs), graphics processing units (GPUs), System-on-a-Chip (SoC) and other products for various markets. However, growing demand for its data center GPUs continues to demonstrate why the stock can deliver excellent returns.
Data center revenue rose 122% year over year to $3.5 billion in the third quarter, boosting AMD’s total revenue by 18%. Management attributed the higher data center revenue to strong demand for its Instinct family of GPUs. As more advanced AI models are launched and more use cases for this technology emerge, this could significantly increase demand for AMD chips.
Last year, management estimated that the data center AI chip market would grow from $45 billion in 2023 to over $400 billion in 2027. But after data center business exceeded revenue expectations in 2024, management recently updated its long-term forecast and is now anticipating the future developments. The market for AI accelerators will reach $500 billion by 2028.
The writing is on the wall for investors. The adoption of AI is creating new leaders in the semiconductor industry. AMD generated more data center revenue than Intel last quarter. Intel dominated the CPU market for decades, but the AI boom is now favoring companies with expertise in developing GPUs, which are essential for training AI models.
Nvidia is the other GPU vendor that could be a good choice for investors, but AMD still has a lot of opportunity to gain market share over Intel in CPUs, which may not be fully reflected in the stock’s valuation. With AMD shares currently down 33% from their recent high, now is a good time to start investing before further growth sends the stock higher.
Consider the following before purchasing shares in SoundHound AI:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has positions in Advanced Micro Devices, Nvidia, SoundHound AI and Tesla. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Intel, Netflix, Nvidia, Oracle, ServiceNow, and Tesla. The Motley Fool recommends the following options: Short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
2 AI Stocks to Buy in December and Hold for 20 Years was originally published by The Motley Fool
