Artificial intelligence (AI) has been the biggest narrative in the financial markets for the past two years. Despite this fact, pure-play AI stocks haven’t exactly shown admirable performance since the start of the year. The root cause is rather simple — most of the companies developing advanced AI solutions, like OpenAI and Anthropic, are private.
With that being said, there is no shortage of ways to benefit from the AI boom. Over the past few years, we’ve witnessed the incredible rise of Nvidia on the back of its advanced GPUs, and Vistra Corp, a utilities company, was one of the best performers in the S&P 500 in 2024, as it benefited from increased data center demand.
Capitalizing on trends and narratives isn’t always straightforward — in a time dominated by a budding trade war and tariff concerns that could easily lead to recession or resurgent inflation, getting in at the right price is a must. Let’s take a look at 2 AI stocks that fit the bill.
Picks for you
SoundHound AI (NASDAQ: SOUN)
SoundHound AI secured a strong first-mover advantage in terms of voice AI solutions. This translated to pretty significant sequential and year-over-year (YoY) growth, resulting in an all-time high (ATH) price of $24.23 in late December.
Since then, the price of SOUN shares has dropped significantly. One of the key drivers behind the dip was the release of Nvidia’s updated stock portfolio, which revealed that the chipmaker had sold off its stake in the voice AI business.
On February 27, the company reported its Q4 earnings. Both earnings per share (EPS) and revenues came in above analyst expectations. Soundhound AI stock (NASDAQ: SOUN) saw a 17.48% surge to the upside, from $9.21 to $10.82, in the aftermath.
The rally didn’t hold as profit-taking ensued — another contributing factor was the fact that the company delayed the filing of its annual Form 10-K. Soundhound attributed the delay to accounting complexities surrounding two of its acquisitions — Synq3 and Amelia Holdings. While the news did put downward pressure on the stock, the business has also stated that it expects to file the report no later than March 18.
At press time, Soundhound AI stock was trading at $9.40, marking a 52.64% loss on a year-to-date (YTD) basis.
Wall Street, however, remains optimistic. At present, 5 equity researchers track SOUN shares and issue ratings for them. The stock is a consensus ‘Moderate Buy’, with 3 ‘Buy’ ratings and 2 ‘Hold’ ratings. Although they generally cut their price targets on this AI stock since February, analysts currently set an average price forecast of $15.80 — which equates to a 68% upside from current prices.
Snowflake (NYSE: SNOW)
Snowflake has started to turn heads following its latest earnings call on February 26, which saw a double beat.
While the results were mostly promising, Snowflake also saw a marked 14% reduction in earnings on a sequential basis, as well as a relatively minor reduction in revenue growth. In addition, the company’s Chief Executive Officer (CEO) Frank Slootman abruptly stepped down.
As decent as the earnings call was, the price of Snowflake stock (NYSE: SNOW) dropped from $166.19 to $154.23 at press time after a short-lived surge. The AI stock has effectively erased all of its YTD gains, and is up by just 0.96% since the start of the year.
Equity researchers are also quite bullish on Snowflake stock, which currently has 32 ‘Buy’ ratings and 5 ‘Hold’ ratings. The average price target set by analysts is $213.06 — which implies a 36.67% upside from current prices.
Despite valuation concerns, as the stock is trading at a forward price to earnings (PE) of 170, investment strategist Shay Boloor dubbed SNOW undervalued based on a free cash flow (FCF) analysis. Still, patience could be warranted, as macroeconomic trends could easily lead to a more attractive entry point for this AI stock in the near future.
Featured image via Shutterstock
