2 AI stocks to buy before it’s too late

Experts working with this technology say that artificial intelligence (AI) will bring new services that people will not be able to imagine living without. Investing early in the companies behind breakthroughs associated with artificial intelligence could lead to exceptional returns in the coming years.

Now is the right time to start looking for AI stocks. To aid in that search, here are two AI stocks that could be poised to rise for early buyers.

1. SoundHound AI

SoundHound AI (SOUND -0.21%) is an up-and-coming AI stock with a market cap of just $1.8 billion, and the business continues to see growing demand for its voice AI technology. SoundHound’s bottom line has exploded from $20 million to $55 million over the past two years. It just reported another strong quarter, with revenue up 54% year over year in the second quarter.

Voice assistance will be an area that will see incredible advancements as AI becomes more sophisticated in the coming years. SoundHound is establishing itself as a leader in this subsector. It already has a partnership with Nvidia to provide AI chip leader Drive platform with in-vehicle voice technology.

SoundHound has contracts with several companies in the automotive and restaurant industries, suggesting validation of its AI capabilities. It just acquired Amelia, a leader in enterprise artificial intelligence software, which will expand SoundHound’s reach into new industries, including retail, financial services and healthcare.

The company is still reporting losses on the bottom line, but its adjusted net loss narrowed from $20 million in the first quarter to $15 million in Q2. Management sees the company’s operating margin growing to the levels of other software companies, or more than 30% of annual revenue, over the long term.

You don’t want to wait for SoundHound to hit that profit target, because by then the stock will have already exploded in value. If you want to maximize your returns, now is the time to start a position.

2. Advanced microdevices

Businesses and consumers will increasingly need high-powered computer chips to train AI models and run AI software in the future. This is a substantial growth opportunity for Advanced microdevices (AMD -0.59%) — one of the leading semiconductor suppliers.

AMD is a leading supplier of computer processors and graphics processing units (GPUs) for computers, data centers, video game consoles and other business markets. Demand for PC and data center chips has been strong this year, while other markets such as gaming and embedded processors have seen lower revenue.

The recent drop in stock price is a great buying opportunity because of the momentum AMD has in the data center space. AMD’s data center revenue more than doubled in the second quarter from the year-ago quarter, and it’s also seeing strong demand for its Ryzen family of central processing units (CPUs).

AMD just made a major acquisition to expand its reach into the $400 billion data center chip market. Pays $4.9 billion in a cash and stock deal to buy ZT Systems, a leader in AI infrastructure. This provides AMD with valuable design and cloud computing services that will complement its chip business well and strengthen its AI solutions.

Demand for AI chips will explode by the end of the decade as companies upgrade existing data center infrastructure and build more. AMD is already a profitable business, with trailing net income of $1.3 billion on revenue of $23 billion, so it’s a relatively safe growth stock to buy for the long term.

Wall Street analysts expect AMD’s earnings per share to grow 43% on an annual basis over the next few years, which could generate excellent returns for investors. The stock’s recent pullback is a good time to start investing in AMD before more growth sends shares higher in 2025.