AI Stocks: A Once-in-a-Decade Investment Opportunity

2 Game-Changing Artificial Intelligence (AI) Stocks to Buy Now That Could Help Set You Up for Life | The Motley Fool

The artificial intelligence (AI) boom will create fortunes for savvy investors. Here are two innovative AI leaders that are set to deliver wealth-building returns to their shareholders. SoundHound AI's (SOUN 2.03%) state-of-the-art voice technology can interpret speech in a similar manner to the human brain. Its conversational AI provides a faster and more accurate experience than competing platforms -- at a time when companies are rushing to harness the power of this game-changing tech. Restaurants use SoundHound AI's tools to create custom voice assistants. Its smart answering and ordering solutions eliminate customer wait times by processing multiple orders simultaneously. The tech can also boost profitability by enabling a restaurant to process more orders and reduce labor costs. Customers include Papa John's, Casey's, and Chipotle. Automotive titans are also racing to adopt SoundHound's technology. The voice AI pioneer's speech recognition software integrates with generative AI models like OpenAI's ChatGPT. It provides access to a vast amount of real-time information like navigation, weather, and maintenance updates conveniently delivered via hands-free controls. Leading automakers, including Mercedes Benz, Stellantis, and Honda, count among SoundHound's growing list of clients. SoundHound's sales, in turn, are expanding at a torrid clip. The company's revenue jumped by 54% year over year to $13.5 million in the second quarter. Profitability should come as the small-cap company continues to scale its operations. SoundHound's recent move to acquire enterprise AI software provider Amelia ought to help in this regard. Management expects the deal to boost SoundHound's earnings by the second half of 2025. Nvidia's (NVDA 4.55%) AI chips are selling like hotcakes. So much so that the semiconductor designer has struggled to meet the booming demand for this increasingly crucial technology. These shortfalls have kept prices elevated and delayed the AI plans of many companies. Chip buyers clearly want more supply. They're eager to embrace a new competitor to Nvidia -- and Advanced Micro Devices (AMD 2.16%) is up to the task. AMD's data center revenue soared 115% to $2.8 billion in the second quarter. These gains were fueled by strong sales of the company's new AI accelerators, which help to quicken machine learning workloads. CEO Lisa Su sees revenue for AMD's new AI chips surging to more than $4.5 billion in 2024. Yet the chipmaker is just scratching the surface of its long-term market opportunity. Su predicts that global AI chip sales will grow to a whopping $400 billion by 2027. AMD could capture 20% of this rapidly expanding market by 2028, according to analysts at Piper Sandler. Large chip buyers, such as Microsoft and Meta Platforms, are reportedly planning to integrate AMD's AI accelerators into their cloud computing operations. Like SoundHound, AMD is using acquisitions to strengthen its competitive position and accelerate its expansion. The tech leader completed its $665 million purchase of Silo AI on Aug. 12. Europe's largest private AI lab comes with a team of experienced scientists and engineers who will work to bolster AMD's model and software development efforts. Just days later, AMD struck a deal to acquire ZT Systems for $4.9 billion. The AI infrastructure provider should fortify AMD's ability to design and deploy large-scale cloud computing systems for its customers.

A Once-in-a-Decade Investment Opportunity: 2 Artificial Intelligence (AI) Stocks to Buy Now | The Motley Fool

Artificial intelligence promises to be the most transformative technology of the next decade. During a CNBC interview, Wedbush Securities analyst Dan Ives called artificial intelligence (AI) the fourth industrial revolution. He drew parallels between the burgeoning AI market, the creation of the internet in 1995, and the launch of the iPhone in 2007. Ives expects an "AI spending tidal wave" to supercharge the technology sector in the coming years. Similarly, billionaire fund manager Dan Loeb told clients that AI "has matured to the point that it is driving a transformational technology platform shift similar to those seen roughly once per decade: the personal computer in the 1980s, the internet in 1990s, mobile in the 2000s, and cloud in the 2010s." In short, AI is a once-in-a-decade investment opportunity. That doesn't mean the so-called AI bubble -- a phenomenon whereby numerous AI stocks have gained substantial value over a short period -- will never burst. There will undoubtedly be setbacks and drawdowns along the way. But smart investors will ignore temporary hurdles because they know interest in AI is here to stay. Here's why Amazon (AMZN 0.52%) and Docebo (DCBO 1.73%) could help investors capitalize on this once-in-a-decade opportunity. Amazon reported mixed financial results in the second quarter, with its top line growing a little more slowly than analysts anticipated. Specifically, revenue increased 10% to $148 billion, but Wall Street expected $148.6 billion. However, generally accepted accounting principles (GAAP) net income surged 94% to $1.26 per diluted share, easily exceeding the consensus estimate of $1.03 per diluted share. Unfortunately, Wall Street was also disappointed with the guidance. Management said operating income would increase between 3% and 34% in the third quarter, but analysts anticipated 37% growth. However, the shortfall is due to investments in AI infrastructure and fulfillment capacity for the holidays, as well as digital content costs associated with NFL Thursday Night Football, all of which are worthwhile expenses. Looking ahead, Amazon should continue to benefit as e-commerce spending increases, but its largest opportunities lie in digital advertising and cloud computing. Amazon is the third-largest digital advertiser worldwide, and the company is gaining share so quickly that it could overtake second-place Meta Platforms by the end of the decade, according to eMarketer. Amazon Web Services (AWS) runs the largest public cloud in the world, and it widened its lead by a percentage point over Microsoft Azure and Alphabet's Google Cloud Platform in the second quarter. AI is one reason AWS is gaining market share. New products like generative AI development platform Amazon Bedrock and coding assistant Amazon Q are gaining customer traction. CEO Andy Jassy recently told analysts, "Our AI business continues to grow dramatically with a multibillion-dollar revenue run rate despite it being such early days." AWS is perfectly positioned to meet the demand for AI cloud services because it operates the largest public cloud and spends heavily on product development, from custom AI chips to software. Looking ahead, Wall Street expects Amazon to grow earnings per share at 25% annually through 2025. That consensus estimate makes the current valuation of 42 times earnings look reasonable. Those figures give a price/earnings-to-growth (PEG) ratio of 1.7, a material discount to the three-year average of 2.9. Investors should feel comfortable buying a small position in this stock today. Docebo specializes in corporate learning software. Its learning management system lets businesses create, curate, deliver, and measure the impact of training across internal and external use cases. To elaborate, businesses can use the platform to train employees and partners and to embed customer-facing education into their products. Docebo has differentiated itself with two innovative applications. Docebo Flow lets users integrate learning content into other applications, enabling employees to learn during the normal flow of work. Docebo Shape uses generative AI to turn source materials, like online articles, corporate documents, and case studies, into learning content. In a note to clients, Morgan Stanley analysts Josh Baer and Keith Weiss wrote, "Docebo is not only disrupting the internal learning management system (LMS) market, taking share from legacy vendors, but it is also leading the market in a greenfield external learning opportunity." Docebo reported solid financial results in the second quarter that beat expectations on the top and bottom lines. Its customer count climbed 9%, and the average contract value rose 10%. In turn, revenue increased 22% to $53 million, and adjusted net income surged 86% to $0.26 per diluted share. Interim CEO Alessio Artuffo told analysts, "Our leadership in the learning industry, along with the effective use of AI, continue to set us apart from legacy competitors." Looking ahead, Grand View Research estimates that LMS spending will compound at 19% annually through 2030. Docebo should match that pace, with potential upside arising from its generative AI application. Wall Street expects Docebo's adjusted earnings to increase by 58% annually through 2025. That makes its current valuation of 83 times adjusted earnings look reasonable. Patient investors should feel comfortable buying a small position today.