Firms like Nvidia, Microsoft, and Amazon have develop into synonymous with synthetic intelligence (AI). These trillion-dollar giants are among the many highest-quality corporations traders can purchase, however smaller names can symbolize promising AI alternatives as effectively.
C3.ai (NYSE: AI) was one of many world’s first enterprise AI corporations when it was based in 2009, and SoundHound AI (NASDAQ: SOUN) has develop into a pacesetter in conversational AI. The latter has even gained the endorsement of Nvidia, which bought a stake within the firm late final 12 months.
C3.ai and SoundHound have market capitalizations of $3.1 billion and $1.8 billion, respectively, however they may soar in worth because the AI revolution unfolds.
1. C3.ai: A novel enterprise AI firm
Oracle chairman Larry Ellison just lately mentioned the fee to construct a real, cutting-edge frontier AI mannequin from scratch might exceed $100 billion. That is why many companies select to use accomplished fashions from third events like OpenAI or Anthropic when creating AI software program. Nonetheless, with C3.ai, they will skip that step completely (relying on their wants).
C3.ai affords a portfolio of over 40 completed AI purposes, which could be personalized to swimsuit virtually any enterprise in as little as three months from the date of the primary assembly. Actually, the corporate has prospects in 19 totally different industries, together with monetary providers, manufacturing, and oil and fuel, to identify a number of.
One of many world’s largest chemical producers, Dow, makes use of the C3.ai Reliability platform for predictive upkeep. It has achieved a 20% discount in gear downtime, which is such a powerful outcome that it is rolling the software program out to extra of its belongings.
C3.ai sells its AI purposes straight to prospects, however it additionally sells them collectively with the cloud divisions of tech giants like Microsoft, Amazon, and Alphabet. It is a win-win for all events — the cloud suppliers can supply their prospects extra alternative when it comes to AI, and C3.ai good points entry to a big pool of companies to which it will probably doubtlessly promote its software program. Throughout its fiscal 2025 first quarter (ended July 31), C3.ai’s accomplice community accounted for 72% of its deal circulate, making it a precious gross sales channel.
The corporate generated a file $87.2 million in income throughout the quarter, up 21% from the year-ago interval. That marked the sixth consecutive quarter of accelerating income development as the corporate reaps the advantages of its shift to consumption-based pricing that was put into movement two years in the past. Primarily based on administration’s steerage, income development might speed up but once more within the fiscal second quarter.
C3.ai inventory is buying and selling greater than 85% under its all-time excessive, which was set throughout the tech frenzy in 2020. It was unquestionably overvalued again then when its price-to-sales (P/S) ratio topped 80. It has now come down to a extra cheap 9.1, under its three-year common of 10.5. That is nonetheless a premium valuation, however you possibly can arguably justify it with the corporate’s accelerating income development.
2. SoundHound AI: A pacesetter in conversational AI
Like C3.ai, SoundHound AI has additionally developed a portfolio of AI instruments for companies. It focuses on conversational AI purposes which are able to voice-based interactions with their customers, making them extremely helpful in locations like eating places or inside your automobile.
SoundHound permits eating places to settle for buyer orders utilizing AI, whether or not it is in-store, over the cellphone, or within the drive via, with no human enter required. Plus, its Worker Help software program can converse with staff about retailer insurance policies and even present directions on how to make sure menu objects.
A number of well-liked restaurant chains use SoundHound’s merchandise, together with Chipotle Mexican Grill, Papa Johns, and Beef ‘O’ Brady’s. The latter simply rolled out AI ordering throughout all of its company places, and it is also giving franchisees the choice to use it.
SoundHound’s Chat AI voice assistant is well-liked within the automotive business. It is already dwell throughout six manufacturers underneath the Stellantis umbrella, and it is able to offering drivers with info on a variety of matters from sports activities scores to the standing of an upcoming flight. SoundHound makes use of Nvidia’s Drive platform to energy its voice interface, which permits Chat AI to operate even when there is no such thing as a web or mobile connectivity. So, not solely did Nvidia purchase a small stake in SoundHound, however the two corporations are additionally carefully working collectively.
SoundHound generated $45.9 million in income in 2023, and administration’s steerage requires the highest line to develop 74% to $80 million this 12 months. The corporate’s outlook additionally anticipates development accelerating in 2025 as income hits $150 million.
A part of the robust forecast is attributable to SoundHound’s latest acquisition of Amelia, an AI firm that helps companies create AI brokers to serve their prospects and workers. Amelia is anticipated to contribute $45 million to SoundHound’s income subsequent 12 months, which is included within the above forecast. The acquisition will broaden SoundHound’s attain into new industries like healthcare, monetary providers, and insurance coverage.
SoundHound inventory trades at a P/S ratio of 23.9 as of this writing, practically triple the valuation of C3.ai inventory. Whereas that is costly, its P/S ratio shrinks to 11.5 based mostly on administration’s 2025 income outlook. That mentioned, traders will want to undertake a long-term mindset as SoundHound rides the tailwinds from the continued development of AI expertise.
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John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Alphabet, Amazon, Chipotle Mexican Grill, Microsoft, Nvidia, and Oracle. The Motley Idiot recommends C3.ai and Stellantis and recommends the next choices: lengthy January 2026 $395 calls on Microsoft, quick January 2026 $405 calls on Microsoft, and quick September 2024 $52 places on Chipotle Mexican Grill. The Motley Idiot has a disclosure policy.
2 Small-Cap Artificial Intelligence (AI) Stocks to Buy Right Now was initially revealed by The Motley Idiot