Nvidia's Expansion Rate is Decreasing. Discover Two Lesser-Known Artificial Intelligence Shares with Impressive Revenue Prospects.
Nvidia's Expansion Rate is Decreasing. Discover Two Lesser-Known Artificial Intelligence Shares with Impressive Revenue Prospects.
Nvidia continues to dominate in the field of chips for artificial intelligence (AI). The company's strong position in the data center market has led to significant revenue growth of over 100% in recent years. Nvidia's impressive market value of $3.4 trillion is a testament to its success.
However, as a large business with $113 billion in trailing revenue, maintaining this growth rate will become more challenging. Nvidia's revenue growth has already begun to slow, with a year-over-year increase of 94% in the latest quarter. The stock's previous surge due to accelerating growth may be affected by this deceleration in growth.
Despite this, there are still ample opportunities to benefit from the AI competition. For investors seeking smaller AI companies with potential for huge returns, I suggest considering the following two options:
1. SoundHound AI
Shares of this AI voice-solutions provider have been on a rollercoaster ride recently, but they're skyrocketing following another quarter of strong growth. Despite its size, SoundHound AI is attacking a significant market opportunity.
The company reported an 89% year-over-year revenue increase in the third quarter, partly due to a recent acquisition and the expanding demand for its AI voice solutions. It also saw double-digit growth in its automotive segment and has successfully diversified into customer service and retail banking through its acquisition of Amelia.
Although SoundHound remains unprofitable, with a loss of $22 million on $25 million in revenue in the most recent quarter, the stock is surging due to the company proving the existence of a large and growing market for its technology. SoundHound's AI agents are helping reduce the number of calls to customer support centers, and its Smart Ordering AI service for restaurants has surpassed 100 million customer interactions.
Moreover, SoundHound is positioning itself as a leader in AI voice assistance for drivers. According to a survey it conducted with Big Village, 76% of U.S. drivers would use an AI-powered voice assistant if provided in their vehicles. This could present a significant opportunity over the long term, with half of drivers expressing frustration in locating and operating vehicle features.
SoundHound's voice assistance has already gained ground in the market, making partnerships with major brands such as Chipotle Mexican Grill, Jersey Mike's, and Applebee's. A partnership with Stellantis, the owner of Jeep, Dodge, and Ram vehicles, has also brought SoundHound's AI assistance to several European brands.
Even though the stock has surged recently, I believe it's a good time to consider investing. SoundHound's pace of growth is impressive, and the company boasts a market cap of just $3.4 billion. I would view SoundHound's recent gains as a bullish sign about its future. Although the stock will be volatile, an investment in SoundHound has the potential for significant returns over the next decade as it expands into retail and banking.
2. Astera Labs
The insatiable demand for Nvidia's chips can lead to other opportunities in the AI infrastructure market. Astera Labs is a major supplier of connectivity products for data centers, which enable the transmission of data between chips and are essential for AI training.
With demand for its products soaring, Astera Labs completed its initial public offering (IPO) earlier this year and may be poised for several years of robust growth. Astera Labs' revenue grew 206% year-over-year in the third quarter, further establishing itself as a leader in this market.
The stock is currently pricing quite high, with a market value of $16 billion, despite generating only $305 million in trailing revenue. However, investors are paying a high valuation, expecting the company to maintain a high level of growth for several more years. There are several reasons why Astera Labs could meet these expectations.
The company is expanding its product lineup, which also increases its addressable market opportunity. Importantly, management is focusing on developing products that can drive higher profitability over the long term. For example, Astera's new Scorpio Smart Fabric switches can help data centers improve performance and command high average selling prices, benefiting margins.
Astera Labs has a high gross margin of nearly 78%, indicating that customers are willing to pay a premium for its products. The company reported an adjusted net income of $40 million in Q3 on revenue of $113 million, resulting in a profit margin of 35%.
AI is a significant long-term growth driver for chip suppliers and infrastructure companies. More data centers and AI servers will be built over the next 10 years. Adding shares of a rapidly growing supplier like Astera Labs could help you profit from this opportunity.
In the context of searching for investment opportunities in the AI sector, SoundHound AI, an AI voice-solutions provider, has demonstrated impressive growth. The company reported an 89% year-over-year revenue increase and a significant market opportunity, despite remaining unprofitable. Investors see potential in SoundHound's technology, which is helping to reduce customer support calls and improve the ordering process in restaurants.
In the AI infrastructure market, Astera Labs, a supplier of connectivity products for data centers, has seen remarkable growth. Having completed its IPO and with a high valuation, investors anticipate several years of robust growth due to the company's expansion of its product lineup and focus on developing higher-profitability products.