Investors can find monster winners in the stock market by focusing on the rate of a company's growth. It's no secret that artificial intelligence (AI) is fueling strong returns for some companies. SoundHound AI(NASDAQ: SOUN) and Broadcom(NASDAQ: AVGO) are two stocks that have soared over the last year based on rapid growth for AI-related products.
The good news is that Wall Street analysts still see some upside for these growth tech stocks based on near-term catalysts. Here's why it's not too late to add these two gems to your portfolio.
1. SoundHound AI
The market for AI technology is expected to expand rapidly in the coming years, and one area that is already seeing explosive growth is conversational voice AI. This technology is having a major impact on customer service and smart ordering, which is fueling strong growth for SoundHound AI.
Shares of SoundHound AI are up 135% over the last year, but with a market cap of just $1.7 billion, the company's value could soar over the long term. Cantor Fitzgerald analysts recently upgraded the shares to an overweight (buy) rating with a $7 price target, implying upside of 48% over the next 12 months. Most analysts have a buy rating on the shares with an average price target of $7.79.
Wall Street likes SoundHound's recent acquisition of Amelia, which accelerates the company's market expansion. SoundHound has a growing base of customers in the restaurant and automotive industries, but Amelia's leading enterprise AI software will allow SoundHound to serve large banks, retailers, and other Fortune 500 companies.
SoundHound is benefiting from great momentum right now. Revenue continues to grow quickly, up 54% year over year in Q2. The only negative remains losses on the bottom line, but the company's subscription-based business model, along with opportunities to earn royalties when software developers use its technology, will allow profitability to improve as the business grows larger.
Wall Street's price targets are usually based on a projection of where the share price can trade in the next 12 months or so, but investors who hold the stock for several years could see even greater returns. The company's strong growth shows a wide-open market for voice AI technology, and SoundHound is well-positioned to be a leader.
2. Broadcom
The growing adoption of AI in data centers is driving tremendous demand for leading suppliers of semiconductors and storage solutions, which is an opportunity for Broadcom. Its products help move data securely in servers, computers, smartphones, routers, storage devices, and cars.
The stock has been a solid performer in recent years but has rocketed 107% over the last year due to exploding demand for Broadcom's AI-related business in data centers. J.P. Morgan analyst Harlan Sur has an overweight (buy) rating on the shares with a $210 price target.
Broadcom's momentum could fuel the stock to new highs in the near term. Revenue grew 47% year over year in fiscal Q3 ending Aug. 4, driven mostly by the additional revenue from the acquisition of VMware, but also from strength in AI semiconductor solutions. Revenue from custom AI accelerators grew over threefold compared to the year-ago quarter.
Most analysts still like Broadcom's prospects because non-AI markets could pad the company's revenue in calendar 2025. The company reported strong growth overall in non-AI bookings, indicating a strong recovery underway. Management raised its full-year revenue guidance to $51.5 billion, representing year-over-year growth of 43%.
Wall Street expects Broadcom's earnings to grow 19% on an annualized basis in the coming years. With the stock trading at a forward price-to-earnings multiple of 28 on next year's earnings estimate, investors are getting solid value for the shares that could support excellent returns.
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John Ballard has positions in SoundHound AI. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
