Sharp investors in artificial intelligence (AI) are always searching for bright prospects that go beyond the typical industry heavyweights like Nvidia (NASDAQ:NVDA). These three undervalued AI stocks offer solid arguments for being among the best investments. It is essential to comprehend the basics of these organizations to make wise investment choices. These businesses have outstanding expansions with significant Big Tech clients, quick sales growth with goods like GPUs for AI applications and smart acquisitions. These essential traits strengthen their prominence in the tech and industrial sectors.
A key feature of these stocks is the potential for substantial returns on investment. The aim is to provide a comprehensive overview of why these stocks merit consideration by delving into their unique advantages and market strategies. Unearthing the hidden gems in the AI industry can potentially transform one’s portfolio, regardless of one’s experience level. Discover why investing in these three AI stocks could be a game-changing move.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) leads the development of high-performance processors for computing, graphics and visualization technologies. With $1.1 billion in operational profits for Q1 2024, the operating margin was 21%. This indicates a significant rise in profitability, bolstered by increased sales and effective cost containment.
Additionally, the use of AMD’s EPYC CPUs in cloud and business settings has grown. During a seasonally weak quarter, the business increased its sales share of server CPUs. Hyperscalers like Alphabet (NASDAQ:GOOG,GOOGL), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) are expanding their portfolio of fourth-generation EPYC processors.
Moreover, adopting AMD’s products propels the high demand for AI computational power. The MI300X GPUs are widely used for generative AI inferencing and training, greatly boosting top-line growth. There is a high demand for AI processing power due to Oracle (NYSE:ORCL), Microsoft and Meta Platforms (NASDAQ:META) installations. In less than two quarters, MI300X achieved over $1 billion in sales, making it the fastest-rising product in AMD history.
Overall, AMD’s inclusion on the underappreciated AI stocks list stems from the MI300X GPUs’ rapid adoption for AI applications, highlighting its innovative edge and revenue growth.
Innodata (INOD)
Innodata (NASDAQ:INOD) provides data engineering services. A core component of Innodata’s expansion strategy is its ability to develop current initiatives with significant Big Tech clients. The business just revealed a major program expansion with an estimated yearly run rate revenue of $23.5 million, which demonstrates the company’s ability to scale quickly.
Since it builds upon a $20 million initiative launched less than two weeks ago (Q1 2024), these extensions show a robust and continuous commitment from these clients. They also demonstrate Innodata’s capacity to provide essential services that adapt to the changing demands of major IT companies.
Additionally, the company’s agreements show that its clients have made significant multi-year commitments, indicating a steady and expanding source of income. Two more major Big Tech businesses have signed deals with Innodata, bringing its total number of clients to seven. Among these new clients are a significant generative AI business and a top independent software vendor (ISV) serving consumers. Hence, these alliances strengthen Innodata’s position in the generative AI and AI industries while increasing its income possibilities.
In short, Innodata’s strategic expansions with major Big Tech clients and securing long-term contracts support its presence on the underappreciated AI stocks list.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ:SOUN) focuses on voice AI and conversational intelligence technologies. SoundHound’s acquisition of SYNQ3 significantly improved its capabilities and market presence, especially in the restaurant industry. Pillar two revenue held approximately 30% of revenue in Q1 2024 through the acquisition of SYNQ3. Organic growth, with roughly $3 million in positive contributions, derived from the acquisition.
With an average term of almost seven years, the company’s cumulative subscriptions and bookings backlog increased by about 80% over Q1 2023 to $682 million (in Q1 2024). This backlog gives a clear picture of future income possibilities since it contains committed client contracts and realistic adoption estimates for subscription services.
Further, SoundHound’s Q1 financial performance focuses on sustainable growth and operational efficiency, with the gross margin reaching 66%. Moreover, research expenses were at $14.9 million. This is just a 5% increase over Q1 2023 due to reduced costs and improved productivity. With a 14% rise to $5.5 million, sales and marketing costs were able to fund more extensive go-to-market plans.
To sum up, the acquisition of SYNQ3 and solid backlog have solidified SoundHound’s position on the underappreciated AI stocks list.
As of this writing, Yiannis Zourmpanos held long positions in AMD and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
