Every decade seems to create a new wave of growth stocks that benefit from the latest trends in the economy. The last 20 years have created tremendous wealth for investors who jumped early on the growth of e-commerce (Amazon), streaming video (Netflix), and electric cars (Tesla). Artificial intelligence (AI) has the makings of the next wealth-building opportunity in the stock market.
The AI market is expected to grow from $184 billion in 2024 to $826 billion by 2030, according to Statista. Here are two stocks that many investors may wish they had bought in another 20 years.
1. SoundHound AI
AI-powered voice assistants are starting to see widespread adoption for things like customer service and smart ordering, but it could create many new use cases in electric cars and other markets over the next decade. SoundHound AI (SOUN -1.16%) is emerging as the leader in this market. It's a relatively small company that is experiencing rapid growth.
SoundHound has a trailing revenue of $67 million, which provides the foundation for explosive returns in the coming years as more businesses adopt its technology. Its third-quarter revenue grew 89% year over year, partly boosted by the recent acquisition of Amelia, but it was already reporting high growth before that, with revenue up 54% year over year in Q2.
SoundHound is in the process of expanding its customer base beyond automotive and restaurants, which have been its focus, to other markets like retail, healthcare, and banking. This will significantly expand its addressable market and help the company scale to improve margins. Last year, SoundHound's top five customers comprised over 90% of the business but now represent less than a third.
Another encouraging sign about SoundHound's growth prospects is the list of partnerships with other leading tech companies. Nvidia, Samsung, Oracle, and ServiceNow are among the companies working with the AI voice leader.
The main negative against SoundHound AI is a lack of profitability, but this is not unusual for a small tech company. Management expects the business to achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of 2025, which is a catalyst for the share price. Investors have the opportunity to get in on the ground floor before Wall Street catches on to this emerging growth story and bids the share price higher.
2. Advanced Micro Devices
Advanced Micro Devices (AMD 0.10%) shares tripled over the last five years as it gained market share against Intel. AMD is a leading supplier of central processing units (CPUs), graphics processing units (GPUs), System-on-a-Chip (SoC), and other products for a variety of markets. However, the growing demand for its data center GPUs continues to show why the shares can deliver outstanding returns.
Data center revenue jumped 122% year over year in Q3 to $3.5 billion, which helped drive AMD's total revenue up 18%. Management credited higher data center revenue to strong demand for its Instinct family of GPUs. As more advanced AI models launch and more use cases emerge for this technology, it could drive significantly more demand for AMD's chips.
Last year, management estimated the data center AI chip market to grow from $45 billion in 2023 to more than $400 billion in 2027. But after its data center business exceeded revenue estimates in 2024, management recently updated its long-term forecast and now anticipates the market for AI accelerators to reach $500 billion by 2028.
The writing is on the wall for investors. The adoption of AI is causing new leaders to emerge in the semiconductor industry. AMD generated more data center revenue last quarter than Intel. Intel dominated the CPU market for decades, but the AI boom now favors companies with expertise in developing GPUs, which are essential for training AI models.
Nvidia is the other GPU supplier that could be a good choice for investors, but AMD still has a lot of opportunity to gain share on Intel in CPUs, which may not be fully reflected in the stock's valuation. With AMD stock currently down 33% from its recent high, it's a great time to start an investment before more growth sends the stock higher.
