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AI, or artificial intelligence, has been a part of our technological lexicon for years. The stock market, however, has only recently become enamored with its possibilities. AI-related stocks have soared, sparking debate on whether we are witnessing a bubble. Nevertheless, astute investors are flocking to these equities, sensing immense opportunity.
For growth investors, the prospect of discovering the next multi-bagger stock is an ever-present allure. The realm of AI presents a fertile ground for such prospects, reminiscent of prior booms experienced by SaaS and cloud companies. These three AI juggernauts have already delivered substantial gains, but the journey ahead could see their ascendancy continue.
The Mighty Engine: Nvidia (NVDA)
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Nvidia (NASDAQ:NVDA), founded in 1993 by the visionary Jensen Huang, propels the AI revolution. Analysts paint a diverse picture for Nvidia, with price targets ranging from $478.40 to $2,762.14. Strikingly, a sanguine average target of $973.12 mirrors the current price, implying further upside potential.
This year alone, NVDA stock has nearly doubled, securing its place as the world’s third-largest company by market cap. The recent introduction of the Blackwell B200 GPU, touted as the world’s most potent chip, underscores Nvidia’s innovation. Priced at $40,000 each, these AI marvels are already backlogged through 2025, promising a 30-fold data processing speed with a quarter of the power consumption.
Traders skittish over lofty valuations might find solace in Nvidia’s moderate forward P/E ratio of 39x, a remarkable feat given its turbulent price swings. It signals that the company may not be as richly priced as perceived, potentially even possessing latent value.
The Challenger: Advanced Micro Devices (AMD)
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Advanced Micro Devices (NASDAQ:AMD), a stalwart in the semiconductor domain since 1969, under the stewardship of Dr. Lisa Su, Nvidia’s distant familial relation, also commands divergent price targets of $60.00 to $270.00 per share. The tantalizing average target of $190.75 hints at further expansion from current levels.
AMD’s ascent from Nvidia’s shadow is testament to its prowess, especially with CPUs where it wrested market share from Intel. The company’s AI GPUs boast formidable capabilities, rivaling Nvidia’s, finding utility among tech giants like Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), and OpenAI.
Trading at a premium compared to Nvidia, with a forward P/E ratio of approximately 53x and a lofty sales multiple of nearly 13x, AMD showcases a remarkable 3-year revenue CAGR of 32%. Such robust growth trajectories suggest that AMD may eventually justify its premium valuations.
The Dark Horse: Soundhound AI (SOUN)
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Soundhound AI (NASDAQ:SOUN), a relative newcomer in the AI arena with Nvidia’s backing, despite recent analyst caution, boasts an average price target of $7.15, a clear indicator of untapped potential.
In the realm of AI-powered voice products and services, comparable to Amazon‘s (NASDAQ:AMZN) Alexa or Apple‘s (NASDAQ:AAPL) Siri, Soundhound garners praise. Bolstered by Nvidia’s significant stake of over 1.7 million shares, the company services esteemed clientele such as Mercedes-Benz (OTCMKTS:MBGAF), Netflix (NASDAQ:NFLX), Honda (NYSE:HMC), and Mastercard (NYSE:MA).
Facing the highest risk among the trio, Soundhound also bears the mantle of potentially the most lucrative multi-bagger. Despite trailing profitability, trading at 30x sales and confronting tech titans as competitors, the combination of Nvidia’s support and an elite client roster casts Soundhound as a dark horse primed for substantial returns.
On this day, Ian Hartana and Vayun Chugh bore no financial stake in the securities discussed. The views expressed are aligned with the InvestorPlace.com Publishing Guidelines.
Chandler Capital is the brainchild of Ian Hartana and Vayun Chugh – self-taught investors lauded by Seeking Alpha for their insights. Their investment forte spans GARP stocks, emphasizing a long-term perspective across sectors like technology, energy, and healthcare.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
