While artificial intelligence (AI) is not a new concept, it has emerged as the hottest investment trend in 2023. The launch of generative AI applications such as ChatGPT, Bard, and Cloud 2 have generated significant interest. AI is also not a passing trend, since the technology is already well established in the daily lives of many people.
In this context, it makes sense for forward-looking investors to take positions in AI stocks with promising prospects. SoundHound AI (son 2.83%) And UiPath (road -1.77%) Two companies that have a good chance of rising to prominence in the next decade. Let's analyze it further.
SoundHound AI
SoundHound is a prominent name in AI-powered audio technology. With strong adoption of its AI-driven voice and speech solutions, SoundHound AI has seen the rapid addition of new customers and increased usage from existing customers.
The company is particularly focused on two markets: the automotive industry, where voice recognition can be used to enhance safety and user experience; and the restaurant industry, where voice commands can improve efficiency and customer experience in areas such as reservations and placing food orders.
SoundHound has distinguished itself from competitors such as Microsoft And the alphabetGoogle by offering highly customizable voice services. Additionally, unlike many other AI solutions that convert speech into text and derive meaning from text, the company's technology extracts meaning directly from speech. This in turn improves speed and accuracy.
Although SoundHound AI is not yet profitable, recent financial data raises hopes. In the second quarter, revenue rose 42% year over year to $8.8 million, while a loss per share of $0.10 was an improvement from $0.19 a year earlier. The company has invested heavily in research and development, which will in turn enhance future performance.
Hence, SoundHound appears to be sacrificing near-term profitability for future growth – classic behavior for early-stage high-growth stocks. Management also guided for revenue of $43 million to $50 million in fiscal 2023, which would mean a solid 49% year-over-year jump at the midpoint.
However, SoundHound AI is not without its challenges. The company's backlog of cumulative bookings (bookings from committed customer contracts) grew just 20% year over year to $339 million in the second quarter. Since the growth rate is lower than the overall growth rate, there are concerns about the future revenue growth path.
In addition, the company also faces significant customer concentration risks given that just three customers account for approximately 67% of the company's revenue in 2022. Shares are down approximately 87% from their all-time high in May 2022.
However, the fundamental story for this voice recognition specialist is strong, and its stock price may rebound in the coming months. SoundHound AI's prowess in voice recognition (with a potentially addressable market worth up to $160 billion by 2026) is impressive. Given a revenue growth rate of 40% or more year-over-year and gradual progress toward profitability, investors could consider buying a small position in this stock.
UiPath
UiPath, a Robotic Process Automation (RPA) player, helps customers automate and scale repetitive, tedious, and low-skilled tasks, thereby improving cost efficiency and overall productivity.
according to Gartnerthe company represents approximately 35.8% of the global RPA market share, a significant improvement from the 1.6% share in 2016. According to Grand View Research, the global RPA market is expected to grow annually at a very impressive CAGR of 39.9% from 2.9 billion $ in 2023 to $30.8 billion in 2030.
UiPath has long used AI and machine learning techniques to build its bots (software used for automation). The company has recently begun leveraging generative AI and specialized AI technologies to improve the speed and performance of its offerings as well as expand its use across new use cases. The company's platform also allows customers to interact with large language models such as OpenAI's ChatGPT, Amazon's Falcon and Alphabet's PaLM 2.
UiPath is not yet profitable, but improving non-GAAP (adjusted) operating margins and positive free cash flow help build confidence. The company ended the second quarter with approximately 10,890 customers and achieved strong growth in the number of high-value customers. The number of customers spending $1 million or more annually on the company's offerings rose 30% year over year to 254. UiPath also reported remaining performance obligations of $905 million at the end of the second quarter, up 28% year over year. Basis of the year. Strong growth in RPO indicates the company's strong order pipeline.
With access to huge sets of customer data (which can help build smarter, more efficient bots) and the ability to seamlessly integrate generative AI capabilities across multiple platforms (owned by tech giants), UiPath seems well-positioned to capture a larger share of the market. Booming RPA.
Susan Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Manali Bhade has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Microsoft, and UiPath. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
