Investors seeking promising companies beyond the typical AI heavyweights should consider AMD, Innodata, and SoundHound AI, writes Yiannis Zourmpanos, an InvestorPlace contributor and the founder of the stock-market research platform Yiazou Capital Research. These companies vary in size: AMD has a market capitalization exceeding $275 billion, while the other two are much smaller. However, they share traits such as rapid sales growth and Big Tech clients.
Advanced Micro Devices (AMD)
With a market capitalization of $277.8 billion, AMD produces integrated circuits, electronics, processors, adapters, and chipsets. In the first quarter of 2024, the company reported $1.1 billion in operating profit with an operating margin of 21%. The business’s profitability is increasing, bolstered by increased sales and effective cost containment, notes Zourmpanos.
He included AMD in his list of undervalued AI stocks due to the rapid adoption of its MI300X GPUs for AI applications. These processors, Zourmpanos notes, have been the fastest-rising product in AMD’s history.
Additionally, more companies have started using AMD’s EPYC CPUs. Cloud solutions based on EPYC are offered by Google, Oracle Cloud, Microsoft Azure, and others. Moreover, AMD processors have been adopted by American Airlines, Emirates Bank, and Shell, as stated in the company’s first-quarter 2024 presentation.
Innodata
Innodata, with a market capitalization of $430 million, provides data engineering services, including AI-enabled software platforms and services for AI data collection and annotation. Among its clients are Big Tech companies, notes Zourmpanos. This year, Innodata was awarded an expansion of one of its large language model (LLM) development programs by one of its existing Magnificent Seven Big Tech clients, as stated in the company’s first-quarter 2024 report. This expansion is expected to add approximately $23.5 million in annual revenue. Another contract, signed in April, is supposed to bring in around another $20 million. Overall, the company expects revenue growth of at least 40% in 2024. For comparison, its revenue grew 10% to $86.8 million in 2023.
Strategic expansions with Big Tech companies, as well as secured long-term contracts, represent the main reasons why Zourmpanos chose Innodata for his underappreciated AI stocks list.
SoundHound AI
With a market capitalization of $1.38 billion, SoundHound develops speech and sound recognition technologies. Its clients include hotels, restaurants, and the automotive industry. For example, its restaurant solution can take orders, process and understand multiple languages, learn any menu, answer frequently asked questions, and offer special promotions. Recently, SoundHound acquired SYNQ3 Restaurant Solutions, which Zourmpanos believes will strengthen its position in the restaurant industry.
SoundHound develops automotive solutions in partnership with Nvidia and implements them with Stellantis (with brands such as Alfa Romeo, Chrysler, Citroën, Dodge, DS, Fiat, Jeep, Maserati, Opel, Peugeot, and others).
The company has reported that its first-quarter revenue increased 73% year-over-year to $11.6 million. The acquisition of SYNQ3 and solid backlog solidify SoundHound’s case for being on the underappreciated AI stocks list, concludes Zourmpanos.
