Contrary to a common assumption, all the big stock gains stemming from the advent of artificial intelligence aren't in the rearview mirror. There are plenty more to be reaped during the next chapter of the AI revolution.
The stocks that will likely be dishing out these future gains, however, aren't necessarily the ones that have done so thus far. New leaders will emerge.
With that as the backdrop, here's a closer look at three artificial intelligence stocks ripe for parabolic moves sooner or later.
IonQ
You likely know that computers are ultimately based on a system of digital ones and zeros, differing combinations of which mean different letters, numbers, and instructions. That's where we get the term "binary code," in fact. And this approach has worked well enough for decades.
Science, materials, and knowledge are finally pushing the limits of what binary code is capable of handling, however. A new kind of computing called quantum computing -- based on subatomic particles -- can utilize a practically infinite combination of information all at the same time. For perspective, quantum computers operate 100 million times faster (or more) than today's conventional computers.
IonQ (NYSE: IONQ) is one of the few companies developing such quantum computers. It's also arguably leading the commercialization charge on this front. Although it many have only done $11.4 million worth of business last quarter, that was a 106% year-over-year improvement driven by growing demand for this relatively new tech that has serious potential on the artificial intelligence front.
The stock hasn't always or consistently reflected the company's underlying opportunity. For instance, it soared in late 2021 shortly after its initial public offering only to fall to below-IPO level in the latter half of 2022. It bounced again in the middle of last year only to end up retreating again. It's currently down more than 60% from last year's peak, and back near new 52-week lows as a result. The market's just not quite sure what to make of this new company.
The science and its prospects are real, though. Market research firm SkyQuest Technology believes the quantum computing industry will grow at an annualized pace of more than 30% through 2031, reaching more than $7 billion.
SoundHound AI
You've probably interacted with a voice-based virtual customer service agent. You've also likely been less than impressed. Such platforms have traditionally only been able to suggest options you might want, and then verify your selection by confirming it with another simple vocalization. This tech isn't always overly helpful, mainly because it's ultimately "dumb" technology merely programmed to sense words you might be saying.
Enter SoundHound AI (NASDAQ: SOUN) .
Just as the name implies, this company offers artificial intelligence-powered conversational platforms that can successfully take drive-thru orders, identify a song you're humming, and provide complex customer service without the need for an actual person handling the task. It's being particularly well-received within certain brands of automobiles too, where drivers should keep their eyes on the road and hands on the wheel.
The technology works well because it leverages the large language models that power most conversational AI chatbots like ChatGPT and Microsoft 's Copilot. It's the kind of tech many consumer-facing and consumer-oriented companies have been waiting on to help automate and simplify a range of customer service functions.
The stock's not been a particularly easy one to stick with, especially of late. It's quite volatile mostly because the company's still in the red, and hasn't always lived up to expectations since going public in 2022. In other words, SoundHound AI isn't necessarily a great fit for everyone's portfolio.
For investors who can stomach the volatility in exchange for a compelling opportunity, however, it might be worth taking a small swing on this ticker.
This might help: As of the most recent look, the analyst community's consensus price target on SoundHound AI shares stands at $7.79, which is more than 50% above the stock's present price. These analysts are modeling revenue growth of 75% this year, and expect the company's top line to accelerate to a growth pace of more than 80% next year.
Arm Holdings
Companies like Nvidia and Qualcomm have been the centerpieces of discussions regarding AI-capable computer processors, and rightfully so. Nvidia's tech is at the heart of most data centers, while Qualcomm's Snapdragon processor is able to turn smartphones into mobile generative-AI devices. Arm Holdings (NASDAQ: ARM) isn't really in the mix.
But, maybe it should be from this point forward.
Arm Holdings is also a chipmaker. Although its tech isn't particularly touted by personal computer and mobile device manufacturers (which are more likely to feature processor brands like Intel and Nvidia), Arm's wares are just as important to the computer-technology market. Its solutions are also found in smartphones, computers, wearables, automobiles, and more. The company says that by the end of this year there will be on the order of 100 billion individual AI-capable devices with its tech on board.
It's not stopping there. In May of this year the company confirmed it's working on AI-specific chips that will likely debut in 2025. In the meantime, Apple has confirmed its newest mobile processors that will turn its latest-generation higher-end iPhones into self-contained artificial intelligence devices are also ultimately based on Arm's technology. That's the early outcome of a developmental relationship that's contracted to last at least through 2040.
Underscoring Arm's potential with this partnership is the fact that Apple is reportedly looking beyond mobile devices and considering entering the AI data center processor race. It's unclear if these processors -- assuming they're ever unveiled -- will be Arm-based. It's likely they would be, however, given the two companies' relationship.
Data source: StockAnalysis.com. Chart by author.
That being said, Arm Holdings stock is well-positioned to for a parabolic move higher in the wake of its recent tepidness if for no other reason than the company's already consistently profitable, and almost certain to remain so for the foreseeable future. Never even mind its past and projected double-digit revenue growth rate.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Qualcomm. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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