With every disruptive technology that comes along, there will be winners and losers. Such is the case in the artificial intelligence (AI) market. The robust demand that some of these companies are seeing right now suggests that a lot of wealth will be created from AI adoption.
Here are two AI stocks with the potential to be on the winning side of the AI revolution and investors might want to buy and hold onto them for monster return potential.
1. Soundhound AI
One promising small-cap AI stock to bet on is Soundhound AI(NASDAQ: SOUN). Many businesses in the restaurant and, increasingly, the auto industry are using its conversational voice AI technology.
Taking orders at restaurants and giving commands to a car while driving are two areas that are clearly going to benefit from AI technology. All we have to do is look at Soundhound's second-quarter results. Revenue grew 54% over the year-ago quarter, with cumulative subscriptions and bookings backlogs nearly doubling to $723 million.
Most of Soundhound's growth is driven by restaurants, but it continues to gain traction in the auto industry. Several European brands, including Alfa Romeo and Peugeot, are starting production with Soundhound Chat AI. The company also announced that a U.S. electric vehicle manufacturer will soon start production with Soundhound's voice assistance technology across its entire fleet.
Soundhound is not resting on its laurels. It continues to pursue new markets. On this note, the company recently acquired enterprise software company Amelia, which will extend its growth potential to other industries like retail and financial services. Amelia will contribute over $45 million of recurring software revenue, and management also expects the acquisition to benefit the company's profitability in 2025.
Soundhound has yet to turn a profit, but considering the company's strategy to generate revenue from product royalties and subscriptions, the business should be very profitable down the road. By the time it is reporting a profit, the stock could be trading significantly higher than it is now.
2. HubSpot
Another AI growth stock to buy is HubSpot(NYSE: HUBS). It sells a subscription-based platform powered by AI that brings all of a company's data together into one place. This makes it a lot more efficient for teams to get insights and act on sales leads. The company has consistently grown its revenue at 20%-plus rates in recent years, but it's still a relatively small company in a large and growing market.
HubSpot ended the second quarter with 228,000 customers, bringing its trailing revenue to $2.4 billion. It's a small company in a growing $80 billion market, which speaks to its long-term potential to give shareholders massive returns.
Right now is a good time to buy the stock after it's fallen from its recent highs. Investors are worried about slowing growth in a difficult macroeconomic environment. Analysts expect full-year revenue to be up 18% year over year, which is off its previous pace.
Still, HubSpot will continue to grow at high rates over the long term. It has a key advantage in using a freemium pricing model to allow small businesses to easily start using the product. Over the long term, management's strategy is to encourage businesses to upgrade to premium services and its revenue growth to date points to a big opportunity.
In fact, HubSpot's annual revenue is growing at a trajectory similar to that of industry leader Salesforce in its early years of growth. Salesforce stock went on to deliver a 5,600% return to shareholders.
HubSpot's price-to-sales ratio currently sits at 10.5, which is also a valuation similar to that of Salesforce stock 20 years ago. HubSpot should deliver returns to investors on par with its future revenue growth rate, which points to market-beating returns.
Should you invest $1,000 in SoundHound AI right now?
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John Ballard has positions in SoundHound AI. The Motley Fool has positions in and recommends HubSpot and Salesforce. The Motley Fool has a disclosure policy.
