SoundHound and Snowflake are low cost shares of their respective industries.
Artificial intelligence (AI) shares are some areas out there the place buyers are in search of shares that might go parabolic — a standing given to a inventory as a result of its worth chart seems to be like a parabola, shortly rising on the worth axis in a comparatively brief time.
I’ve recognized two firms that might obtain this standing: SoundHound AI (SOUN -0.97%) and Snowflake (SNOW -1.51%). Every has a powerful probability of going parabolic sooner or later.
SoundHound and Snowflake have robust funding circumstances
Each firms are closely concerned within the AI arms race. SoundHound has AI know-how that helps course of audio inputs and converts them into inputs that computer systems can make the most of. Two areas the place that is seeing robust adoption are the restaurant and automotive industries.
Within the restaurant sector, SoundHound’s know-how is changing drive-thru attendants and delivered efficiency exceeding that of its human counterparts. On the automotive facet, SoundHound’s know-how is being mixed with generative AI fashions to create a extra helpful driving assistant. This know-how has been applied in a number of Stellantis automobiles and is in use in Europe and Japan, though a U.S. launch is probably going coming quickly.
SoundHound is a comparatively small firm proper now, as its Q2 income whole was solely $13.5 million (up 54% 12 months over 12 months). Nonetheless, administration expects its 2025 income to high greater than $150 million as extra bookings are transformed into precise product launches. It is this sort of development that might flip SoundHound AI right into a parabolic inventory.
Snowflake can be concerned within the AI revolution on the software program facet. Coaching these fashions requires an unbelievable quantity of knowledge, which is the place Snowflake is available in. Snowflake’s information cloud product provides firms the instruments they should seize information, retailer it effectively, and feed it into purposes. Snowflake additionally has the Snowflake Market, the place datasets may be bought to coach AI fashions. Snowflake’s product squarely advantages from extra firms utilizing AI, which ought to be a catalyst for the enterprise.
In Snowflake’s second quarter of 2025 (ended July 31), it grew product income by 30% 12 months over 12 months to $829 million. Nonetheless, its remaining efficiency obligations rose 48% to $5.2 billion, which exhibits that its contracted utilization is rising. Product income is predicted to rise about 26% for the complete 12 months.
With the inventory buying and selling for 12 occasions gross sales, it is beginning to appear like an excellent worth for the software program firm. Snowflake is placing up robust outcomes, however buyers do not see the flashy AI ranges of alternative different companies have. Simply examine Snowflake to Palantir, which trades for 43 occasions gross sales and grew at a 27% tempo in Q2 (sure, slower than Snowflake!).
If Snowflake obtained that very same degree of hype, it may simply go parabolic.
Why have not these firms gone parabolic but?
For Snowflake, if every little thing was going proper for it, I would not be speaking concerning the probability of it going parabolic; it could already be taking place.
Snowflake must turn out to be extra environment friendly and generate some profits. Whereas Snowflake compares favorably to Palantir in some methods, it would not in others. Palantir is a completely worthwhile firm that will increase its revenue margin every quarter, whereas Snowflake doesn’t.
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SNOW Profit Margin (Quarterly) information by YCharts
Every was at an analogous profitability degree three years in the past, so a turnaround is feasible. If Snowflake can generate some income, it’ll acquire respect out there and see its inventory worth rise accordingly.
SoundHound has excessive expectations already baked into the inventory, however buyers are nonetheless ready for a “wow” second to essentially ship the replenish. Over the subsequent few quarters, SoundHound could have an opportunity to present buyers what they’re in search of, because it’s poised to transform an enormous quantity of its $723 million backlog into realized income.
Till then, SoundHound will probably be buying and selling on the prospects of a powerful future enterprise. Nonetheless, if SoundHound’s use case expands (like the way it’s doing with its Amelia product in banking), then it is primed to go parabolic.
Keithen Drury has positions in Snowflake. The Motley Idiot has positions in and recommends Palantir Applied sciences and Snowflake. The Motley Idiot recommends Stellantis. The Motley Idiot has a disclosure policy.