Buying and holding solid technology stocks for the long term is a proven way to make money in the stock market. With this strategy, investors can both benefit from the disruptive innovation in this sector and benefit from the power of compounding.
For example, an investment of $1,000 in the Technology sector Nasdaq-100 index from ten years ago is now worth more than $5,000. Of course, the index has had its ups and downs over the past decade, but investors who were smart enough to put their money into potential long-term winners have seen their investments grow significantly.
An investment of $5,000 in Nvidia a decade ago is now worth almost $1.35 million, suggesting that tech stocks have the ability to make investors millionaires over the long term. Of course, not every tech stock is Nvidia, and investors shouldn’t be under the impression that putting their money in one company could help them become millionaires.
However, buying solid technology stocks as part of a diversified portfolio can ultimately help you build a million-dollar portfolio in the long run. Tech stocks Super microcomputer (NASDAQ:SMCI) And SoundHound AI (NASDAQ: SOUND) both are sitting on huge growth opportunities that could send their stocks skyrocketing and even help investors become millionaires.
1. Super microcomputer
Super Micro Computer, also known as Supermicro, has been one of the top stocks on the market over the past year. A $1,000 investment in this stock a year ago is now worth $4,000, and it remains a solid buy thanks to its attractive valuation.
Supermicro’s price-to-sales ratio of 4.4 and forward earnings multiple of 23 make buying the stock a no-brainer, especially given its excellent growth. The company, which makes servers, is on track to end the current fiscal year with revenue of $14.9 billion, which would be more than double the revenue it generated in the previous fiscal year.
More importantly, Supermicro is taking steps to ensure it can remain a fast-growing company for a long time to come. Supermicro recently announced that it is adding three new manufacturing facilities to enhance the production of liquid-cooled server racks. More specifically, the company aims to more than double the total production of its liquid-cooled server racks from the current capacity of 1,000 per month so it can meet the rapidly growing demand for artificial intelligence (AI).
This is a smart move. Demand for liquid-cooled data centers is expected to grow by more than 24% annually over the next decade, generating nearly $40 billion in revenue by 2033. Meanwhile, sales of AI servers are expected to rise from an estimated $30 billion last year. to $150 billion by 2027. Supermicro is benefiting greatly from the growing adoption of AI servers and is one of the major players in this space.
The company has a huge growth opportunity ahead that will allow it to maintain its healthy growth level for a long time to come. Not surprisingly, analysts expect Supermicro’s profits to increase by more than 62% annually over the next five years. The market could reward such impressive growth with more upside potential, and Supermicro could prove a top buy for anyone looking to build a million-dollar portfolio.
2. SoundHound AI
SoundHound AI is another company trying to take full advantage of a disruptive trend in the form of voice AI solutions. Customers can use SoundHound’s voice AI platform to design custom wake words, convert text to speech, and build voice assistants, among other things.
SoundHound’s voice AI platform is already experiencing tremendous demand. First quarter 2024 revenue rose 73% year over year to $11.6 million. More importantly, the company’s full-year revenue guidance of $71 million points to an acceleration of growth as the year progresses, which would translate to a 55% jump from last year.
SoundHound is achieving such excellent growth because it has been able to build a solid customer base in major industries such as restaurants and automotive. In its May quarter earnings press release, SoundHound said it has entered into agreements with multiple quick service restaurants (QSRs) to deploy its voice AI solutions.
Meanwhile, car companies such as Stellantis are working with SoundHound to deploy generative AI assistants in cars. More importantly, SoundHound says its solutions will also be adopted by electric car makers in Asia and the US.
The company’s cumulative backlog of subscriptions and bookings increased 80% year over year to a healthy $682 million from the previous quarter. This metric is a combination of SoundHound’s committed customer contracts and the potential revenue it could get from existing customers where it is a major provider of voice AI solutions. This healthy gap is why analysts predict SoundHound’s revenue will rise another 47% to $103.6 million by 2025.
However, the size of the company’s order book suggests that it could continue to grow at an elevated pace for an extended period. Furthermore, the conversational AI market that SoundHound serves is predicted to experience an annual growth rate of nearly 25% by the end of the decade, generating nearly $50 billion in revenue by 2030.
SoundHound’s growth to date indicates that it is outperforming the market. Investors looking to buy an AI stock that could boost their portfolios in the long term would do well to take a closer look at SoundHound AI. It has the potential to become a key member of a multi-million dollar portfolio.
Should you invest $1,000 in SoundHound AI now?
Consider the following before purchasing shares in SoundHound AI:
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
2 Millionaire-Maker Technology Stocks was originally published by The Motley Fool
