Why SoundHound AI, Nvidia, and other artificial intelligence (AI) stocks rebounded today

There is no doubt that artificial intelligence (AI) is the catalyst for the current bull market rally. The AI ​​gold rush that began last year is gaining momentum, but market observers continue to question the resilience of this upward momentum. But one company’s strong results gave several AI stocks a boost.

Against this background, audio AI experts SoundHound AI (Soun 16.47%) 13.6% surge, chip maker nvidia (NVDA 5.31%) Up 4.9%, social media expert meta platform (meta 2.18%) It was up 2.4% as of 1:47 PM ET.

After examining all the usual suspects – financial reports, regulatory filings, analyst price target changes – we found nothing that could be a catalyst to explain the uptrend. This seems to suggest that it was the performance of another company that led the rise in AI stocks.

Image source: Getty Images.

Evidence that AI adoption is spreading

The catalyst that sparked the AI ​​stock rally was a surprisingly strong earnings report from the database specialist. trust (ORCL 11.96%). The results provided evidence that demand for AI is spreading.

In the third quarter of fiscal 2024 (ending February 29), Oracle reported revenue of $13.3 billion, up 7% year over year, resulting in adjusted earnings per share (EPS) up 16% to $1.41. It might not seem like much to write home about, but the devil is in the details, and there are two items that particularly catch my attention.

Oracle’s cloud revenue received the most attention at $5.1 billion, up 25% from the previous year. Even more impressive is that the company’s cloud infrastructure results increased 52% year over year. This outpaced the growth of . Amazon web Service, alphabetGoogle Cloud and microsoft Azure, also known as the “big three” cloud providers, grew 13%, 26%, and 30%, respectively. This means that either Oracle is taking market share away from its closest cloud competitors or the demand for its cloud services is increasing. Both may be true.

Additionally, the company’s remaining performance obligations (RPOs), or contractual obligations not yet recorded as revenue, rose 29% to $80 billion. Since RPO provides insight into future revenue trends, this means that Oracle’s revenue growth is likely to continue.

Oracle CEO Safra Catz also noted that AI cloud capacity “significantly exceeds supply.” As a result, Oracle is “opening new cloud data centers and expanding existing cloud data centers very quickly.”

The CEO also noted that the company recently signed a “large second-generation cloud infrastructure deal with Nvidia” in the third quarter, but hinted that more is planned. “We expect to have some very good joint announcements with Nvidia next week,” he said at Nvidia’s GPU Technology Conference (GTC).

This confirms that it was the acceleration in demand for AI that boosted Oracle’s results, which has broader implications for other companies in the AI ​​space.

Benefit from AI

We are only just beginning to understand how widespread generative AI will become. But each of these major companies has carved out a niche in the AI ​​gold rush.

• SoundHound AI creates AI-powered voice and audio solutions serving the restaurant and automotive industries. The company’s tools can be used in restaurant drive-throughs, phone banks, self-service kiosks and more.
• Nvidia provides graphics processing units (GPUs) with the computing power needed for AI systems. The company has achieved triple-digit revenue growth annually over the past three quarters, driven by growing demand for AI.
• Meta Platforms has long been using AI to advance its business, show social media users relevant content and direct targeted advertising efforts. Meta has also developed LLaMA AI, one of the most in-demand large-scale language models available on major cloud infrastructure sites.

Each of these stocks Comparative Cheaper depending on your preferred valuation metric. Meta and Nvidia are currently selling at 25x and 36x forward earnings, respectively, making them excellent choices, especially considering their history of strong growth. SoundHound AI is not yet profitable and sells for 20 times sales, making it more expensive and certainly riskier.

The trend toward AI adoption is clear and offers investors a variety of ways to profit from the AI ​​revolution.