The AI goldrush is not over. Companies like Nvidia and Super Micro Computer are generating staggering returns on the back of excellent and ever-growing financial metrics. Yet, AI stocks are becoming increasingly crowded and expensive, with everyone clamoring to get a slice. Prudent investors are starting to look further afield for undervalued AI stocks—which might be harder than it sounds since almost every tech company is moving into the AI space. That is why we’ve collated the three most promising and undervalued AI stocks and laid out why you should consider them as your next buy.
Symbotic Inc (SYM)
Companies that offer AI-powered supply chain management are in for a great year. Symbotic Inc (NASDAQ:SYM) does that and more, offering robotic software and hardware platforms that map out storage or distribution facilities and automate packing, storage, and retrieval functions. The company aims to reduce delivery time from providers to end users through its Symbiotic platform, regardless of the scale of operations. SYM provides services to distribution centers for groceries, general merchandise, wholesale food, footwear, apparel, and food and beverage suppliers.
So, let me explain why SYM is a great undervalued AI stock. First, its stock currently trades at around $44, while analysts give it a “Strong Buy” recommendation and about a $20 upside.
Second, the company is doing quite well financially. Their latest reports showcased an almost 80% increase in revenue YoY, from $206 million to $369 million. The company is still operating at a net loss—$13 million, to be exact. However, it’s already registered its second quarter with positive adjusted EBITDA, signaling a move toward profitability. In line with these positive results, management is confident that the trend will continue in Q2 2024. Revenue is expected to fall between $400 million and $420 million, and adjusted EBITDA is expected to end between $12 million and $15 million.
UiPath Inc (PATH)
Like with Symbiotic, UiPath Inc. (NYSE:PATH) is offering automation platforms. However, PATH is focused on the workforce and enterprise institutions. Its SaaS platform provides several resources, including “Discover” (process, task, and communications mining, prioritizing data analysis for sales and KPI opportunities), “Automate” (UI and API automation, generative AI, and process automation), and “Operate” (real-time analytics and unified management platforms).
The company’s services cover various industries and specialties, including banking, healthcare, and insurance. It also provides department-specific automation services, like HR, IT, and customer service.
What makes me bullish about PATH is its improving financials. Q3’24 reported a 24% YoY growth for both revenue and ARR. ARR, in particular, reached $1.38 billion. A closer look into its financials indicates a consistent ARR growth, with an estimated 35% CAGR going back to 2022.
Its customer base is also growing, with the number of large customers spending $100k yearly reaching 1,947. Meanwhile, million-dollar customers have grown from 201 to 264 YoY. The company’s guidance reflects this growth; revenue is anticipated to reach $381 million and $386 million next quarter, while ARR is expected to reach $1.455 billion on the high end.
SoundHound AI Inc (SOUN)
Nvidia is the reigning king of AI stocks; and anything it touches turns to gold. SoundHound AI Inc (NASDAQ:SOUN) is one of the many companies Nvidia is invested in, potentially making it a great addition to your undervalued AI stocks list.
SOUND offers an Only Voice AI platform to deliver more natural conversations to users. Its platform stands out, as it performs natural language processing and automatic speech recognition simultaneously, providing faster and more accurate answers. SOUN’s platform can be used for restaurant order-taking, hospitality management, marketing, transcription, automatic content recognition, and more.
It also has a music app that can identify songs sung by the user. That music app might seem small in the grand scheme of things, but the underlying technology is impressive and showcases the platform’s capability and potential applications.
Now – it would be unfair to recommend SOUN solely because of its ties with Nvidia. The thing is, SoundHouse stands on its own two feet just fine. Revenue reached $17.15 million last quarter, signifying an impressive 80% growth YoY. Like with early startups, the company is still operating at a loss, yet we’re seeing narrowing numbers that are getting closer to profitability. Adjusted EBITDA also registered an 80% improvement. To top it all off, analysts are recommending it as a “Strong Buy,” with more than 50% potential upside.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
