Artificial intelligence (AI) has become a dominant force in the tech world, especially in the realm of generative AI. The demand for generative AI, which can produce intelligent responses, images, and videos based on text input, is skyrocketing and projected to grow significantly in the coming years.
Leading generative AI applications like OpenAI’s ChatGPT, Google’s Gemini, and Microsoft Copilot are driving this growth. ChatGPT alone boasts over 200 million weekly active users. The generative AI market is forecasted to expand by about 10 times to $356 billion by 2030, according to Statista.
Here are two stocks poised to capitalize on this trend.
1. Soundhound AI
Soundhound AI (NASDAQ: SOUN) is making waves in the conversational voice assistant space, particularly with its Soundhound Chat AI product. The company is seeing strong demand from car manufacturers and is looking to expand into other industries.
Soundhound has also solidified its presence in the restaurant sector, with more restaurants showing interest in its technology. The company’s quarterly revenue has more than doubled over the past three years, reaching $13.5 million in the second quarter, a 54% year-over-year increase.
With the recent acquisition of AI software company Amelia for $80 million, Soundhound is poised to enter new markets such as healthcare, financial services, smart devices, and retail.
While Soundhound has seen a significant stock value increase, profitability remains a concern as the company is yet to report a profit. However, with a decreasing marketing expense ratio and growing awareness of its capabilities, Soundhound is on track for potential profitability.
Investors looking to get in early on a small-cap AI stock with significant growth potential should consider Soundhound AI, which has seen a 189% increase in value over the past year.
2. Nvidia
Nvidia (NASDAQ: NVDA) has long been a leading provider of GPUs for gaming. In recent years, its GPUs have found applications in cryptocurrency mining, cloud services, and AI model training, establishing Nvidia as a key player in the AI chip market.
Nvidia’s GPUs are utilized by major cloud service providers and the company is collaborating with global giants on AI projects. Its revenue surged by 122% year-over-year in the last quarter, driven by the demand for AI-powered chatbots and generative AI assistants.
While facing competition in the custom AI chip market, Nvidia’s ongoing innovation efforts are expected to maintain its market dominance. The introduction of Nvidia Inference Microservices (NIM) and a new AI foundry service with Meta Platforms showcase the company’s commitment to advancing AI technology.
Nvidia’s hardware business is strong, but its software segment presents a significant growth opportunity. Revenue from software and support services is projected to reach nearly $2 billion annually by the end of the year.
Despite a nearly 200% increase in stock value over the past year, Nvidia’s forward price-to-earnings ratio remains reasonable at 30. While rapid growth may not be sustainable, Nvidia is well-positioned for long-term success in the AI chip market.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Ballard has positions in Meta Platforms, Nvidia, and SoundHound AI. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
Generative AI Is Exploding: 2 Monster Stocks to Buy Now was originally published by The Motley Fool