Key Points
SoundHound AI is positioned for explosive growth as a new industry emerges in voice commerce.
Nvidia’s lucrative position in the AI chip market continues to fuel its stock to new highs.
10 stocks we like better than SoundHound AI ›
You don’t have to be Warren Buffett to build generational wealth in the stock market. All you need to do is focus on innovative companies that are driving change in the economy. As Cathie Wood of Ark Invest says, investing on the right side of change can help you have success as an investor.
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1. SoundHound AI
SoundHound AI (NASDAQ: SOUN) is a relatively small company that could deliver explosive returns as the artificial intelligence (AI) market continues to heat up. It has been developing conversational voice technology for many years. It’s got a major foothold with top restaurants, positioning it as a leader in a fast-growing market for voice assistants.
Quarterly revenue has tripled since 2022. It grew mostly from acquisitions and new restaurant locations signing deals to use its voice AI technology. Revenue was $29 million in the first quarter, up 151% year over year; revenue is generated from product royalties, subscriptions, advertising, leads, and transactions made on voice-enabled products.
There could be a lasting shift in how people use AI over the next 15 years. One of those shifts could be in how people use this technology to place orders. An independent study released by SoundHound found that a high percentage of U.S. drivers who have a voice assistant available would rather use it to place food orders on the go rather than wait in a drive-thru line. SoundHound could tap into that.
SoundHound currently has nearly 13,000 restaurant locations using its technology. Another opportunity it is pursuing is monetizing transactions when people use its voice AI to buy something. Voice commerce is an emerging industry that SoundHound estimates could be worth $63 billion.
While SoundHound’s business is not yet profitable, management has been holding its non-GAAP (adjusted) net loss around $20 million while revenue continues to grow at high rates. Much of its reported net losses is heavy investment in research and development (R&D), where it spent $80 million over the last year — a high percentage of its $102 million in trailing revenue. R&D spending is what paves the way for more innovation. This is potentially pointing to robust growth and wealth-building returns for investors over the next decade.
2. Nvidia
Image source: Nvidia.
For innovations like voice technology to be possible, there has to be sophisticated computer chips somewhere training the AI. Nvidia (NASDAQ: NVDA) is the dominant supplier of those chips, and this puts it in a lucrative position to reward shareholders and create wealth they can pass down to their children.
Every industry is doubling down on AI to improve productivity and gather intelligent insights from their data, which is fueling investment in AI infrastructure. Nvidia’s chips, software, and networking products are indispensable for the data center market. The company’s revenue grew 69% year over year in the most recent quarter, to $44 billion.
Even with the leading cloud service providers and AI researchers using their own custom-designed chips for AI, it’s not slowing Nvidia down. The opportunity is just that big. There’s no replacement for the raw computing power of Nvidia’s graphics processing units (GPUs). Nvidia’s new Blackwell computing platform, designed for advanced AI workloads, set a record score for AI inference on the MLPerf, the gold standard of benchmarks for high-performance computing.
Nvidia’s dominance serves as a positive feedback loop for innovation. It is turning sales of these high-performance chips into extremely high profit margins. Over the last year, it converted 51% of its revenue into a net profit. This provides more resources to invest in new technologies. Its R&D spending has more than doubled in the last few years, which may make it difficult for competitors to keep up.
At its current growth trajectory, Nvidia could maintain 20% or more quarterly revenue and earnings growth for several more years. There is still a lot of upside, as data centers are still shifting from traditional computing systems to cutting-edge hardware for AI training and inference. Analysts expect earnings to grow at an annualized rate of 29% over the next few years, which could double the share price.
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John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
