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Founded in 1993 by brothers Tom and David Gardner, The Motley Fool is helping millions of people gain financial freedom through our website, podcasts, books, newspaper columns, radio shows and premium investment services.
Artificial intelligence (AI) caught investors’ attention this year when OpenAI’s online chatbot, ChatGPT, gave the world a glimpse into the technology’s capabilities. Since then, corporations have been clamoring for generative AI equipment to increase productivity and visitor experience.
This has sparked a race among startups and tech leaders to fill their knowledge centers with semiconductor hardware resilient enough to develop, train, and deploy AI. Chip giant Nvidia has been the biggest beneficiary of this wave of demand, and investors have pushed up their shares. more than 200% this year so far this year.
But there are several tactics to take advantage of the rise of AI, and some corporations operating in this space still go unnoticed. Opera Limited (OPRA 1. 68%) and SoundHound AI (SOUN 5. 63%) are two good examples. These are still small corporations with a higher degree of threat than established players like Nvidia, but each of them has significant potential.
Both stocks are covered by Wall Street, but analysts who have issued value targets seem incredibly optimistic. Here’s why.
Opera is already having a wonderful year with a gain of 111% so far. The company has developed a unique browser with more integrated features than competing platforms like Alphabet’s Google Chrome or Microsoft Edge.
In the last second quarter of 2023 (which ended June 30), Opera had accumulated more than one billion downloads with 316 million active users per month.
Its flagship browser comes with an ad blocker, VPN, messaging feature, and even a local crypto wallet, all of which are features that don’t require plugins. But now it also comes with an integrated generative AI team powered through a combination of Opera’s internal software. AI style called ARIA and OpenAI’s ChatGPT.
Users can ask Opera questions and get direct answers, reducing their dependence on search engines like Google. And it can generate text summaries, translate content, and even write social media posts for users, which are other features that generative AI is known for.
In its second-quarter investor presentation, Oconsistent said 74% of its new consumers are acquired organically and it doesn’t want to resort to expensive marketing to drive growth. As a result, the money you spend on advertising only goes to high-end customers. And this strategy has helped the company triple its average profit per user over the past four years to $1. 17.
In the second quarter, the company generated a total cash inflow of $94. 1 million, representing year-over-year growth of 21%: the tenth consecutive quarter in which it increased cash inflow by more than 20%. It was also beneficial, with a net profit of $13. 5 million, bringing its 2023 total to $29 million.
Since Opera makes money, it returns capital to shareholders, percentage buybacks and dividends. It will distribute two $36 million dividend issues in 2023, the first in June.
The Wall Street Journal lately follows only three analysts covering Opera’s stocks, and all have given it the highest buy rating imaginable. They have an average price target of $21, implying a 66% increase from the trading point at the time of writing.
Opera remains a small company with a valuation of just $1. 1 billion, so investors expect volatility if they decide to buy. While its inventory has more than doubled in 2023, it’s also down more than 50% from its all-time high. , which was established just two months ago.
Shares of SoundHound AI are up 73% so far in 2023 thanks to investor interest in AI. The company specializes in a subfield of generative AI called conversational AI, which develops chatbots that can recognize and respond to spoken voice.
The SoundHound generation has already been followed by many corporations in the hotel and automotive industries.
For example, a restaurant can use SoundHound’s conversational AI to answer one hundred percent of its phone calls. You can accept orders or answer undeniable questions about opening hours and location. But the technology can also be used to process orders from customers out for dinner. , in addition to self-service.
After its good fortune in the hotel sector, SoundHound is now launching a platform called Smart Answering to adapt to all types of companies, which will especially expand its target market.
The company’s generation is also used across major automakers, adding Mercedes-Benz and Honda. Drivers can make requests to their in-car voice assistant to facilitate navigation, locate weather information, or even open or lower vehicle windows.
SoundHound is valued at just $546 million at the time of writing. In the recent second quarter (ended June 30), it generated just $8. 8 million in revenue, representing an impressive 42% increase over last year. As the business continues to grow, visitor demand is steady; Its order book currently stands at $339 million, up 20% from last year.
But buying SoundHound stock carries risks. The company has $115 million in cash and posted a net loss of nearly $22 million in the second quarter.
While it is trying to reduce those losses, there is almost no doubt that it will need some other injection of liquidity at some point. Scaling a generation company can be a capital-intensive exercise.
The Wall Street Journal currently tracks only three analysts covering SoundHound stock. All have given it the highest buy score imaginable and have a consensus price target of $5. 07, implying a potential 118% increase from the trading point at the time of writing.
Given the company’s visitor list and developing order book, its inventory presents a tantalizing risk/reward proposition.
Alphabet’s Suzanne Frey is a board member of The Motley Fool. Anthony Di Pizio has no position in any of the above stocks. The Motley Fool holds positions and recommends Alphabet, Microsoft and Nvidia. The Motley Fool has a disclosure policy. .
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