There are better AI alternatives than audio tech startups.
New technology is exciting, but investors chasing the next big trend can get burned. Artificial intelligence (AI) may be the hottest thing on Wall Street in the future. Hype over its potential has played a key role in driving up the stock prices of many companies associated with the industry since last year. Soundhound AIan AI company focused on audio technology.
That's not to say SoundHound AI won't be successful in the long run, but it has a market cap of $1 billion and generated less than $50 million in revenue last year. Perhaps investors should look for AI companies that are more mature, have a higher floor, and have ample potential to deliver superior returns. For example, companies such as: Palantir Technologies (PLTR 2.44%), Nvidia (NVDA 4.35%)and UiPath (path 0.75%).
1. Palantir's customer acquisition momentum is accelerating
AI may be a hot buzzword, but it's not an off-the-shelf technology. To take advantage of this, companies must develop, train, and implement specific applications. Therein lies a huge opportunity for Palantir Technologies. The software company enables customers to build and deploy custom software applications, including AI, to their businesses through the Gotham, Foundry, and AIP platforms.
Palantir has a long history as a U.S. government contractor, with an early major customer being the state of Washington. Today, Palantir maintains strong ties to government, but is rapidly expanding into the private sector. The company's commercial customer base is growing at an accelerating rate. Palantir ended his 2023 with 221 U.S. commercial accounts, a 55% increase year over year. Customer numbers increased 34% in the third quarter compared to the same period last year.
The long-term opportunity here is huge. Palantir's ability to win large government contracts, including a recent $178 million U.S. Army project, highlights the value the company's technology can add to organizations. In the private sector, there are more than 350,000 companies worldwide (large companies) with at least 250 employees, enough potential to support company growth for many years. .
2. Nvidia offers an entry point for long-term investors
Graphics processing unit (GPU) maker Nvidia is probably one of the cornerstone stocks in AI. The company has exploded in value over the past few years due to its dominance in the AI chip market. Nvidia's GPUs can handle the heavy computing workloads associated with training and manipulating AI models. The company's dominant position in hardware offerings is reflected in its results, with data center revenue increasing 409% year-over-year in the fourth quarter.
Lisa Su, CEO of our biggest rival, AMDpredicts that the AI chip market will grow to $400 billion by 2027. NVIDIA's full-year data center revenue run rate (based on Q4 results) is $72 billion, so there should be significant opportunity going forward, even as the market expands. Competitors are chipping away at AI silicon's estimated 90% market share. Of course, an optimist could argue that: “What if these competitors don't make a big dent in his Nvidia's dominance in the AI chip market?”
The overall stock market has been a bit volatile lately, with Nvidia down 20% from its all-time high. The stock currently looks relatively attractive at a forward P/E of 32x, considering that analysts, on average, think the company's earnings could grow more than 30% annually over the next three to five years. ing. Investors shouldn't jump in too aggressively, but nibbling on a declining Nvidia stock seems like a solid long-term bet with a return on investment.
3. UiPath is a great automation stock
When you think of AI systems replacing humans, visions of robots from Hollywood movies may come to mind. UiPath's business actually lies within that scope, but the software does all the heavy lifting for you. It specializes in robotic process automation (RPA) software and teaches you how to perform repetitive tasks such as filling out forms, filing, and sorting data. This software can replace human effort with routine but necessary tasks, freeing people to focus on tasks that require more creativity and flexibility.
According to a third-party ranking, gartnerMagic Quadrant for UiPath is a leader in RPA software. One of the tell-tale signs of a great business is that customers use more of your products and services over time. The company's 119% net revenue retention rate indicates that existing customers are increasing their spending with the company. Without the need to add new customers, businesses can easily grow and reap the benefits. However, UiPath teeth Revenue increased by 24% in 2023 due to new customer growth.
UiPath is highly profitable, and its revenue growth should spill over into its bottom line. On average, analysts believe that UiPath will see its revenue grow by more than 22% per year over the next three to five years. That's a solid growth rate for a company trading at 33 times 2024 earnings estimates. If you believe that AI and automation will continue to play a major role in the global workforce, it's hard not to feel optimistic about UiPath's prospects.
Justin Pope has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, Palantir Technologies, and his UiPath. The Motley Fool recommends his Gartner. The Motley Fool has a disclosure policy.
