Noted as Advanced Microdevices Has (AMD -2,08%) gone from relative obscurity to semiconductor giant in recent years? If you invested $ 3,000 in AMD stock five years ago, you'd have $ 21,640 today:
Y-Graphics AMD Total Return Price Data
However, I'm not here to recommend AMD today. For that analysis, you can check out this video essay by my colleague Eric Cuka.
There are undoubtedly stocks today that could continue to meet or exceed AMD's wealth-building returns, given enough time. Let's look at two stocks that I believe can do just that.
1. Crowd strike
CrowdStrike CrowdStrike, Inc. (CRWD -3.93%), a cloud-based cybersecurity company, has recently come under scrutiny, with some analysts suggesting it's not a good time to buy the stock. Wall Street professionals are urging investors to wait for a more stable economy before buying CrowdStrike shares, as many customers are currently holding back on security upgrade budgets.
Despite these negative opinions, CrowdStrike seems like a good long-term investment for several reasons.
First, the cybersecurity industry is growing rapidly, and CEOs plan to invest more in cybersecurity and data privacy in 2023, according to a recent PricewaterhouseCoopers survey. This could allow CrowdStrike to benefit from the industry consolidation trend, which sees companies consolidating their various security vendors into one solution rather than purchasing products from many different vendors.
CrowdStrike's investment case also benefits from its business performance. On October 31, CrowdStrike reported annual recurring revenue (ARR) of $1.4T, a year-over-year increase of $54T. Many growth stocks would sell their proverbial mothers for high-octane growth of this caliber.
Additionally, CrowdStrike's Falcon software platform offers 23 products for customers to choose from, and 60% of its subscription customers have at least five modules. This powerful and diverse platform offers CrowdStrike significant room for growth within its current customer base, as well as opportunities for continued customer acquisition.
Finally, despite the recent drop in share price and concerns about a slowdown in growth in 2023, the future still looks promising for CrowdStrike. The company's remaining performance obligations (revenue collected against prepaid contracts) are US$2.8 billion, with US$1.5 billion expected to arrive in over a year. This is the highest dollar amount ever, indicating potential for future growth. Overall, the cybersecurity space is growing and consolidating.
CrowdStrike's impressive financial performance, combined with its currently modest valuation, positions it as a very attractive investment opportunity. I anticipate CrowdStrike will embark on a journey of substantial shareholder returns, similar to AMD's recent rise.
This growth is likely to begin in the near future, perhaps even in the next few months. Fortune favors those who are prepared, so you can prepare for the jump by buying some CrowdStrike shares while they're reasonably cheap.
2. SoundHound AI
Let's dive into the booming artificial intelligence (AI) market.
SoundHound Artificial Intelligence (SOM -1,00%) provides AI-powered speech recognition, transcription, and computer-generated speech to a wide range of well-known clients and is growing in popularity as AI becomes more sought after.
When you give voice commands to the Netflix app on your smart TV, place an automated phone order with your favorite restaurant, or bark commands into your smartphone based on Qualcomm chip, you could very well be talking to a SoundHound AI system. The company has an impressive list of contracts and partnerships.
SoundHound is establishing a massive global target market. The company recently secured $1,400,000 in private equity funding, which should help it hold steady until it begins generating cash profits (expected before the end of 2023).
While SoundHound's stock has fallen nearly 80% from its May 2022 peak, this doesn't reflect the company's outlook. SoundHound's bookings backlog exceeds $$ 300 million and is growing rapidly. With this, the company expects revenue growth of over 50% this year, with realistic expectations of positive net income. The long-term opportunities for SoundHound AI look excellent, as AI continues to be increasingly adopted in customer service roles and everyday life, which should benefit SoundHound tremendously.
While investing in SoundHound may seem risky, it's also a very attractive investment opportunity. This is AI serving a better consumer experience, and SoundHound currently controls a very small slice of a huge market. Investing $ 3,000 or less in SoundHounds at these bargain prices could pay off in the long run.
SoundHound is a deceptively smart little company that should deliver a strong return on investment over the long term. This stock is positioned to make AMD investors envious a few years down the road.
Anders Bylund holds positions in Netflix. The Motley Fool holds positions in and recommends Advanced Micro Devices, CrowdStrike, Netflix, and Qualcomm. The Motley Fool has a disclosure policy.
