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Tech stocks have rebounded strongly in 2023, and one of the key reasons is investors’ growing optimism towards artificial intelligence (AI). The success of OpenAI’s ChatGPT, and the frenzy over the development and widespread deployment of AI, gave a massive boost to stocks like Nvidia (NVDA) - whose chips are rightly considered the engine powering the AI wave.
The rapid expansion of AI presents significant opportunities for future growth, making it a compelling investment choice. As businesses and industries increasingly adopt and deploy AI technologies, companies in the AI space will witness substantial demand for their offerings and deliver massive growth.
Further, AI is not limited to a single industry, and it has applications across various sectors - including technology, healthcare, finance, manufacturing, and more. The addressable market remains large, and exposes investors to diverse end markets.
With AI emerging as the most promising area for future growth in tech, investors should keep an eye on shares of related companies like SoundHound (SOUN), BigBear.ai (BBAI), and C3.ai (AI). Shares of these disruptive tech companies are all trading under $50, but have the potential to skyrocket and outperform the broader market over the next decade. Let's explore the catalysts that could power these stocks higher.
SoundHound
SoundHound is a compelling stock to ride the AI wave. The company is a prominent conversational intelligence player, providing voice AI solutions that enable businesses to deliver conversational experiences to their customers. SoundHound's proprietary technology underpins its voice AI solutions, ensuring unparalleled speed and accuracy across diverse languages. This technological prowess extends its influence to millions of automobiles, televisions, applications, and Internet of Things (IoT) devices.
What stands out is that the company is rapidly expanding its product range, which bodes well for future growth. It introduced SoundHound Chat AI, targeting the automotive market. Additionally, the company has revealed an AI customer service solution called Smart Answering, and introduced a new voice AI product for employee assistance in restaurants. These strategic maneuvers enhance its competitive edge and position the company favorably to secure a significant stake in the conversational AI market.
Thanks to the growing product range and solid demand, SoundHound’s top line is growing at a healthy pace. Moreover, the company is on the path to profitability, which will significantly lift its share price. The strong adoption of its AI restaurant solutions, growing automotive customer base, product expansion, and cumulative booking backlog increase suggest that better days are ahead for SoundHound.
This bullish outlook is also reflected through analysts’ consensus outlook on the AI penny stock. Five analysts cover SOUN, and all of them recommend a “Strong Buy.” Further, the average price target of $4.52 implies 90.7% upside potential from current levels.
BigBear.ai
BigBear.ai provides decision intelligence solutions for three main sectors: global supply chains and logistics, autonomous systems, and cybersecurity. The company serves a diverse clientele, including federal defense and intelligence agencies, third-party logistics providers, manufacturers, retailers, healthcare, and life sciences organizations.
BigBear.ai stock has experienced considerable volatility throughout the year. Nonetheless, it has delivered substantial gains, up 182% year-to-date.
It’s worth highlighting that BigBear.ai delivered its first quarter of positive adjusted EBITDA, net income and cash flows since it went public in December 2021. The company’s emphasis on advancing its AI capabilities and strategic acquisitions to accelerate growth and product development bodes well for the future, too.
Furthermore, the company’s commitment to enhance operational efficiency and broaden its Vision AI portfolio, mainly through the acquisition of Pangiam, should support additional upside.
Of the five analysts covering BBAI, two have “Strong Buy” recommendations, and three suggest a “Hold.” Meanwhile, analysts’ average price target of $3.50 represents an upside potential of about 85% from here.
C3.ai
C3.ai is a pure-play AI company that specializes in providing enterprise AI application software. The company's extensive suite of enterprise AI applications positions it favorably in acquiring more customers. Furthermore, its flourishing partner ecosystem and thriving federal business bode well for future growth.
Fiscal year 2024 has started on a solid note for the company, with revenue reaching the upper end of the projected range. Including the first quarter of fiscal 2024, the company has consistently met or surpassed its revenue guidance for 11 consecutive quarters. C3.ai is witnessing a dramatic increase in demand for enterprise AI adoption and marked strong traction with its enterprise AI applications, especially with C3 Generative AI.
C3.ai continues to broaden its partner ecosystem, closing 60% of its agreements. Additionally, the federal segment of C3.ai's business is demonstrating substantial strength, with a noteworthy 39% year-over-year increase in bookings. Furthermore, the company’s commercial clientele is expanding their usage of C3 applications. The adoption of the C3 Generative AI platform remains strong since its introduction, with eight new agreements secured in the previous quarter. Moreover, C3.ai has closed 12 generative AI agreements since its launch, and maintains a robust pipeline for future engagements.
To conclude, C3.ai is a solid long-term play. However, the stock has appreciated quite a lot year-to-date (about 173%), and is now trading several points north of its average 12-month price target of $27.25.
Out of the 14 analysts covering AI, seven have a “Hold” recommendation, two analysts have a “Moderate Sell” rating, two analysts recommend “Strong Sell,” and two have a “Strong Buy” rating.
