Artificial Intelligence (AI) has the potential to be one of the biggest revolutionary advances in technology the world has ever seen. Companies are just starting to embrace the technology and what it can do. However, initial results are very promising, allowing organizations to become more efficient and better serve their customers.
But make no mistake, artificial intelligence is still in its early days, and there are plenty of opportunities for investors to benefit from companies helping to lead the way with AI. Let's look at some of the best stocks to play the AI bull run.
Nvidia
At the moment, no company is taking advantage of AI more. Nvidia (NASDAQ: NVDA ). Graphics processing units (GPUs) have become the backbone of the infrastructure needed to power AI applications in data centers. GPU chips are able to perform technical calculations faster and with less energy than central processing units (CPUs), making them ideal for use in AI training and inference.
Nvidia's GPUs, meanwhile, have become the industry gold standard thanks to its CUDA software platform, which allows its chips to be programmed directly, saving users time and money. .
Nvidia will continue to be the go-to company for building the more powerful data centers needed to power AI applications. Meanwhile, Nvidia is no one-trick pony, and its networking business is also benefiting greatly from AI.
Nvidia has had incredible growth during its most recent quarter, including more than tripling its revenue. Despite this, the stock is attractively priced at a forward P/E of just 36, which is set to drive growth as the business grows and investors appreciate the stock price.
Amazon
When it comes to AI, Amazon (NASDAQ: AMZN ) Might not be the first stock that comes to mind. However, the e-commerce giant is investing heavily in technology.
The company owns the largest cloud business, Amazon Web Services or AWS, which is benefiting from the spread of AI. It also developed two chips, Trinium and Infinitia, to be used specifically for AI applications.
On the software side, the company has developed platforms to help users build their own AI models and applications. Its SageMaker platform helps users build, train and deploy machine learning models, while its Bedrock platform allows users to access high-performance models from Amazon and other leading AI companies through a single API. provides to help them build AI applications.
Amazon has also created its own AI-powered assistant, Amazon Q, for software developers. An AI assistant can write, test, and debug code. It can also answer questions about company policies, products and other topics.
Amazon has shown in the past that it's willing to spend big to ultimately win big, and AI seems to be no exception. Trading at a forward P/E of around 41, the stock has room to run given the AI growth opportunities ahead of the company.
Sound Hound AI
Shares of Sound Hound AI (NASDAQ:SOUN) News skyrocketed earlier this year that Nvidia had invested in an AI-powered voice assistant company. However, more recently, the stock has returned to more reasonable levels.
SoundHound's technology helps voice assistants and humans interact more naturally, allowing users to ask more complex questions while getting better answers. The company has a strong foothold in the automobile industry and is also making good progress in the restaurant space. However, the applications of its technology should extend far beyond these two industry verticals.
The company has an attractive revenue business model whereby it receives royalty payments based on volume, usage or product life. For applications where no product is involved, such as with its restaurant offering, it uses a subscription model.
SoundHound is still relatively small, bringing in just $46 million in revenue last year. However, it has a large booking backlog of $661 million, which if honored will turn into revenue over the next several years. The weighted average length of its contracts is approximately six-and-a-half years, with a high revenue back-end load. Most of the company's backlog comes from its relationships with about 20 auto brands and from having its technology in new vehicle models.
Trading at 21 times forward sales, Soundhound stock isn't cheap. However, its value has fallen significantly in recent months, and if it can continue to transfer its technology into more products, it has a lot of potential to grow. For example, moving into smartphones would be a game changer for the company and the stock.
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John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Jeffrey Seiler has no positions in any of the stocks mentioned. The Motley Fool has positions and recommends Amazon and Nvidia. The Motley Fool has a Disclosure Policy.
3 Top AI Stocks Ready for Bull Run was originally published by The Motley Fool.