Artificial intelligence (AI) has taken the world by storm over the past year. Demand for Generative AIwhich can create smart responses, images and videos from simple text instructions, is booming and expected to grow exponentially in the coming years.
Some of the most used generative AI applications are OpenAI's ChatGPT, Google's Gemini, and microsoft Co-pilot. ChatGPT has more than 200 million weekly active users, but overall, the generative AI market could grow roughly 10-fold to $356 billion by 2030, according to Statista.
Here are two actions to take advantage of this opportunity.
1. Bloodhound AI
One area where demand for generative AI is taking off is conversational voice assistants, where Hound AI (NASDAQ: SOUND) He emerges as a leader. The company is seeing strong demand from automakers for Soundhound Chat AI, a conversational generative AI assistant. But the company aims to expand into more industries.
Soundhound has also established itself firmly in the restaurant industry. More restaurants have started communicating with Soundhound about their product rather than the other way around, which is a great validation of the company's technology. Over the past three years, Soundhound's quarterly revenue has more than doubled. Revenue grew 54% year over year to $13.5 million in the second quarter.
Soundhound just acquired Amelia, a leading artificial intelligence software company, for $80 million. The deal opens up more industries for Soundhound to expand into, including healthcare, financial services, smart devices and retail.
The share value has soared over the last year, but the main negative remains uncertainty over Soundhound's profitability. Revenue is booming, but it's not yet reporting a profit. The company's adjusted net loss totaled $14.8 million last quarter.
However, Soundhound spends a lot of money on marketing, which reduces its net profit. The company spent 42% of its revenue on marketing last quarter, but this percentage is gradually falling, which can be attributed to growing awareness of its voice AI capabilities. Looking ahead, your marketing expenses could become a source of profit.
It's for these reasons that the stock, which is up 189% over the last year, is still worth buying. Investors are getting in on the ground floor of a small-cap company. AI stocks That could skyrocket along with the generative AI market over the next decade.
2.Nvidia
NVIDIA (NASDAQ: NVDA) has been a preferred chip supplier for people who play video games for a long time. But in recent years, Nvidia graphics processing units (GPUs) have been used to mine cryptocurrencies, run cloud services in data centers, and train artificial intelligence models. This has allowed Nvidia to translate its dominance in gaming GPUs into similar leadership in the AI chip market.
Nvidia GPUs are used by all major cloud service providers. It is now working with some of the world's largest companies on AI initiatives. The company's revenue has skyrocketed over the past year, up 122% year over year in the latest quarter. A key driver of this demand is the growing investment in the development of AI-powered chatbots and generative AI co-pilot assistants.
One risk for Nvidia is growing competition from custom AI chip makers. However, Nvidia's constant innovation should protect its lead and maintain its momentum. Last quarter, it launched Nvidia Inference Microservices (NIM), which is used by more than 150 companies to accelerate the development of generative AI applications. Nvidia also announced a new AI foundry service with Metaplatforms'Called family of large language models, which will allow nations and companies to use their proprietary data to create custom models and AI applications.
Nvidia is well positioned for growth on the hardware side with its GPUs, but software is an overlooked opportunity. For example, AT&T experienced 70% cost savings after using Nvidia NIM for generative AI call transcription and classification. Nvidia expects software and support services revenue to reach an annual rate of nearly $2 billion by the end of the year.
Despite rising nearly 200% over the last year, the stock's forward P/E ratio on next year's earnings estimate is 30, which is not that expensive for the AI chip leader. While investors shouldn't expect the stock to rise as quickly as in previous years, Nvidia investors can expect the stock to continue hitting new long-term highs.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors. John Ballard He has positions in Meta Platforms, Nvidia and SoundHound AI. The Motley Fool has positions 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