2 Little-Known Artificial Intelligence (AI) Stocks That Could Be Big in 2024

2023 has been a very exciting year for investors. What started with a gesture and fear Dow Jones Industrial Average and S&P 500 Index near all-time high Nasdaq Composite It’s not that far. There were at least two major reasons for the resurrection.

First, the recession many predicted did not materialize, thanks in part to the Federal Reserve’s efforts. Excessive inflation was brought under control and the economy remained relatively strong despite some challenges. Second, the artificial intelligence (AI) craze has taken over Wall Street. That wave helped propel AI-influenced stocks such as: microsoft and nvidia As their business produces great results, new records are set.

The AI ​​wave is expected to continue beyond 2024, and investors are already looking elsewhere in the AI ​​space for potential opportunities. Many companies are doing amazing things with AI. Here are two stocks to watch in 2024.

1. UiPath provides real AI solutions.

Think about the last time you called the customer service line. Have you moved around multiple times and had to repeat the same identity information multiple times? Or perhaps one person has helped you and already knows most of your information just from your phone number? The difference between these two experiences has to do with the technology they use.

Ui Pass (road) Robotic Process Automation (RPA) makes the latter possible, and customers report soaring customer service ratings and significant reductions in call times. This is the actual value of the top and bottom lines.

UiPath customers can also automate tedious and labor-intensive accounts payable processes. Previously, the customer’s employees had to open hundreds of emails containing invoices, download attachments, and enter them into the accounting system. This is an expensive process. Using UiPath AI technology, customers can automate much of this process, freeing up employees to complete higher-level tasks.

On the financial side, UiPath generated annual recurring revenue (ARR) of $1.4 billion last quarter, with ARR growing 24% year-over-year.

Image source: UiPath

UiPath has $1.8 billion in cash and investments and a strong balance sheet with no long-term debt. The company is not yet profitable on a generally accepted accounting principles (GAAP) basis, which is common for growing companies, but it generates positive cash flow from its operations. This is encouraging, as is UiPath’s 85% gross margin.

The stock trades at a price-to-sales (P/S) ratio of 12. Is this reasonable? It’s hard to say at this point. The valuation is low compared to other growing AI companies such as. Palantir Technologies, which posted 19 times sales, but its long-term outlook will ultimately come down to execution. If management executes and UiPath continues to win new customers, the stock will likely perform very well over the long term. If growth stagnates, investors will be disappointed. That’s why it’s wise to allocate a reasonable portion of your portfolio to small, growth companies. Nonetheless, UiPath is an interesting stock that investors should keep an eye on, even if they don’t have it in their portfolio.

2. SoundHound AI is a stock to watch

Another company offering practical solutions is SoundHound AI (Soun -1.81%). SoundHound’s niche is conversational intelligence. The company’s software allows ordering systems to use voice recognition technology to understand and accurately update customers’ orders in real time. White Castle has signed a deal to roll out the feature at 100 drive-up locations in 2024.

SoundHound also offers voice assistant software for cars. Users can obtain much more information during a conversation than most current vehicle systems provide. This will become the standard in restaurants and vehicles in the near future. But SoundHound faces significant competition from big tech and automotive companies.

While its competitors have very deep pockets, SoundHound generated $13.3 million in revenue last quarter and has less than $100 million in cash on hand. On the other hand, this represents a 52% sequential increase in sales, as shown below, and SoundHound reported increased traction across multiple customers.

SOUN Revenue (Quarterly) Data by YCharts

Investors should also note that the number of shares outstanding increased 23% year-over-year last quarter.

SoundHound also trades with a P/S ratio close to 12, but is in a more difficult financial situation than UiPath. Still, there are a number of ways for investors to profit, including an excellent execution that quickly grows sales, or the possibility that a larger company likes the technology and makes an acquisition offer. Anyway, this is another interesting stock and company that AI investors should keep an eye on.