AI, short for artificial intelligence, has surged in popularity in the stock market recently, captivating investors with the promise of tremendous gains. Despite speculation about a potential bubble, intelligent investors are flocking to companies associated with AI technology.
The Rise of Nvidia (NVDA)
Founded in 1993 by current CEO Jensen Huang, Nvidia (NASDAQ:NVDA) stands as a powerhouse driving the AI revolution. Currently ranked as the world’s third-largest company by market capitalization, Nvidia’s stock has nearly doubled since the onset of 2024.
The company recently introduced the groundbreaking Blackwell B200 GPU, the most powerful chip worldwide. Priced at around $40,000, these AI chips are already sold out through 2025. They promise to process data 30 times faster with a quarter of the power consumption. With an attractive forward earnings multiple of just 39x, Nvidia appears to be both undervalued and a strong contender in the AI sector.
The Ascendancy of Advanced Micro Devices (AMD)
Established in 1969, Advanced Micro Devices (NASDAQ:AMD) represents a key player in the semiconductor industry. Led by CEO Dr. Lisa Su, AMD has carved a niche with its powerful AI GPUs, challenging even industry giant Nvidia. With a forward earnings multiple of about 53x and a 3-year revenue compounded annual growth rate of 32%, AMD has significant room to grow into its premium valuation in the AI market.
The Potential of Soundhound AI (SOUN)
As a newcomer in the AI sector backed by Nvidia, Soundhound AI (NASDAQ:SOUN) boasts enormous potential. Despite recent analyst downgrades, an average price target of $7.15 suggests substantial upside for this AI stock. Soundhound focuses on developing AI voice-powered products and services, with a client list comprising major names like Mercedes-Benz, Netflix, Honda, and Mastercard.
While inherently risky, Soundhound stands out as a high-risk, high-reward investment opportunity. Trading at around 30x sales and competing with major tech players, the company’s association with Nvidia and its esteemed clientele hint at the possibility of significant returns.
On the publication date, Ian Hartana and Vayun Chugh did not hold any positions in the securities referenced. The views expressed are solely those of the author, in accordance with InvestorPlace.com Publishing Guidelines.
