Buying these AI stocks as part of a diversified portfolio could be a profitable move in the long run.
Buying and holding solid companies for the long term is a proven investment philosophy that has helped investors realize big gains. This strategy not only allows investors to take advantage of long-term growth trends, but also allows them to benefit from the power of compound interest.
For example, a $5,000 investment in stocks would be: NVIDIA NVIDIA shares worth 10 years ago are now worth a staggering $1.37 million. The graphics card specialist's impressive gains have come from impressive growth over the past decade, driven by demand for its chips from the gaming and data center sectors. Now, artificial intelligence (AI) is becoming another big driver for NVIDIA.
But Nvidia isn't the only company benefiting from the adoption of AI. Micron Technology (MU -2.72%) and SoundHound AI (Seong -1.40%) These companies are also benefiting greatly from the widespread adoption of AI. Of course, it may seem a bit far-fetched for these companies to turn $5,000 into $1 million in 10 years (like Nvidia did), but buying and holding these AI stocks as part of a diversified portfolio may help investors reach their goal of becoming millionaires.
Let's see why.
1. Micron Technology
The rapid adoption of AI is driving the need for more computing power, which is also increasing demand for cloud storage. Precedence Research predicts that the AI-focused storage market will reach $217 billion in annual revenue in 2033, compared to $23 billion last year, growing at a healthy 25% annual growth rate during that period.
Similarly, smartphones, personal computers (PCs), and servers are being outfitted with faster, higher-capacity dynamic random access memory (DRAM) chips to handle AI workloads. Market research firm TrendForce predicts that the average DRAM capacity in smartphones and laptops could grow 14% and 12%, respectively, this year. Meanwhile, DRAM capacity in servers is expected to surge 17.3% this year, after growing 13.6% in 2023.
More importantly, as AI adoption increases, DRAM content in these niche markets is also expected to increase in 2025. Micron Technology is one of the best positioned to capitalize on this long-term growth trend, and the company is already seeing significant increases in sales and profits thanks to AI.
Micron's revenues grew 50% through the first nine months of the current fiscal year to $17.3 billion. Meanwhile, its loss per share narrowed to $0.10 from $4.03 in the same period last year. Micron is expected to finish the fiscal year with revenues of $25 billion, up 61% from the previous fiscal year. Additionally, the company is expected to post adjusted earnings per share of $1.22, compared to a loss per share of $4.45 last year.
As the following graph shows, both metrics are expected to rise over the next few years.
MU Revenue Forecast Data for Next Fiscal Year by YCharts
Given the impressive growth in the memory market thanks to catalysts such as AI, it's likely that Micron can maintain this healthy growth for much longer. We already know that AI-driven storage demand could generate more than $200 billion in annual revenue in 10 years' time. Similarly, sales of high-bandwidth memory used in AI chips are expected to jump from $14 billion this year to $38 billion in 2029.
Meanwhile, the overall market for memory chips is projected to reach $321 billion in annual sales in 2030. Micron's stock has the potential to deliver solid upside over the long term, making it an ideal choice for those looking to profit from the rapidly expanding adoption of AI technology.
2. SoundHound AI
SoundHound AI has been one of the hottest stocks on the market this year, up 175% at the time of writing. Of course, the stock price of the company, which provides voice AI solutions to customers, has experienced some major fluctuations in 2024, but there's no denying the fact that the company's products have gained a lot of traction among customers.
The company's first-quarter 2024 revenue is expected to increase 73% year over year to $11.6 million. Full-year revenue guidance ranges from $65 million to $77 million, with the median representing a 54% increase year over year. By comparison, SoundHound is projected to generate $46 million in revenue in 2023, up 47% year over year.
Even better, SoundHound expects its revenue growth to continue into 2025, projecting sales to exceed $100 million next year. The company estimates its total market cap at $140 billion. If this is true, SoundHound AI could be at the start of a massive growth curve.
The company has built a strong customer base across various industries that can help it capitalize on this exciting opportunity. SoundHound currently has customers in the automotive, restaurant, entertainment, television and customer service markets, and is looking to expand into the retail, financial, healthcare, education and contact center markets.
SoundHound AI solutions are deployed in companies such as: Stellantis The company also operates in the automotive sector and has a number of clients including Applebee's, Church's Chicken, and other quick service restaurants. Thanks to its expanding customer base and the huge market that SoundHound is tapping, the company has been able to build a healthy revenue pipeline.
This is evidenced by the company's cumulative subscription and bookings balance reaching $682 million, a robust 80% increase year over year. According to SoundHound, this metric is comprised of committed customer contracts and potential revenue the company believes it can generate from its existing customer base for which it is a “primary or exclusive provider.”
As SoundHound further develops its addressable market, this metric is likely to continue to improve over the long term. Because of this, SoundHound AI is a worthwhile AI stock to buy and hold for the long term, and its bright outlook could play a solid role in helping investors become millionaires.
