3 Top AI Stocks Ready for a Bull Market

Artificial intelligence (AI) has the potential to be one of the most revolutionary technological advancements in world history. Businesses are just beginning to embrace the technology and its capabilities. However, the initial results have been very positive, allowing the organization to be more efficient and provide better service to its customers.

But make no mistake. Artificial intelligence is still in its infancy, and there are many opportunities for investors to profit from AI-leading companies. Let’s take a look at the stocks best suited for an AI bull market.

nvidia

No company currently benefits more from AI. nvidia (NVDA 1.27%). Graphics processing unit (GPU) manufacturers have become the backbone of the infrastructure needed to run AI applications in data centers. GPU chips can perform technical calculations faster and with less energy than central processing units (CPUs), making them ideal for use in AI training and inference.

Meanwhile, Nvidia’s GPUs have become the industry standard thanks to their CUDA software platform, which allows the chip to be programmed directly, saving customers time and money.

Nvidia will continue to be a company working to build more powerful data centers needed to power AI applications. Meanwhile, Nvidia isn’t a one-trick pony, and its networking business is also benefiting greatly from AI.

NVIDIA has continued to see impressive growth, with revenue more than tripling during the most recent quarter. Nonetheless, the stock is attractively valued at a forward P/E of just 36x, and is likely to see upside as the business grows and investors push the stock higher.

NVDA PE Ratio (Forward) Data from YCharts

Amazon

Regarding AI, Amazon (AMZN -1.07%) It might not be the first stock that comes to mind. However, the e-commerce giant has been investing heavily in the technology.

The company owns Amazon Web Services, or AWS, the largest cloud business that is benefiting from the proliferation of AI. It has also developed two chips, Trainium and Inferentia, specifically for use in AI applications.

On the software side, the company has developed a platform to help customers build their own AI models and applications. The SageMaker platform helps customers build, train, and deploy machine learning models, while the Bedrock platform delivers high-performance models from Amazon and other leading AI companies through a single API that helps customers build AI applications. do.

Amazon has also built its own AI-based assistant for software developers, Amazon Q. AI assistants can write, test, and debug code. We can also answer questions about company policies, products, and other topics.

Amazon has shown in the past that it’s willing to spend big to ultimately win big, and AI appears to be no exception. Trading at a forward P/E of around 41, the stock has upside potential considering the AI ​​growth opportunity ahead of the company.

AMZN PE Ratio (Forward) Data from YCharts

SoundHound AI

stock SoundHound AI (Soun 7.16%) It soared earlier this year on news that Nvidia had invested in an AI-based voice assistant company. However, the stock has recently recovered to more reasonable levels.

Soundhound’s technology helps voice assistants and humans interact more naturally. This allows users to ask more complex questions while getting better answers. It has entered the automobile industry and is also making good progress in the restaurant field. However, the application of the technology should extend far beyond these two industries.

The company has an attractive recurring revenue business model where royalties are paid based on the volume, usage or lifespan of the product. For applications that are not product-related, such as restaurant services, use a subscription model.

Image source: Getty Images.

SoundHound is still relatively small, with sales of just $46 million last year. However, it has a reserve balance of $661 million, which if achieved would translate into revenue over the next few years. The weighted average term of the contract is approximately six and a half years, with a more profitable backend loaded. Much of the company’s backlog comes from relationships with about 20 auto brands and embedding its technology in those brands’ new vehicle models.

Trading at over 21 times forward sales, SoundHound stock isn’t cheap. However, its value has fallen a lot in recent months, and there’s a lot of potential for growth if it can continue to move its technology into more products. For example, the use of smartphones will change the landscape of companies and stocks.

SOUN PS Ratio(Forward) data from YCharts