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Semiconductor company Nvidia has led S&P500 higher this year due to increasing interest in artificial intelligence (AI). But we’re still in the early stages of the AI boom, and some Wall Street analysts are pounding the table about alternative investments. For example:
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expects Gil Luria from DA Davidson SoundHound AI (NASDAQ: SOUND) to reach $9.50 per share in the next twelve months. This forecast implies a 98% upside from the current stock price of $4.80.
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Analysts at Ark Invest led by Cathie Wood expect an increase Tesla (NASDAQ: TSLA) to reach $2,600 per share by 2029. That forecast implies an upside of 1,040% from the current share price of $228.
Investors should never put too much faith in price targets, but SoundHound AI and Tesla are worth considering. Here are the relevant details.
SoundHound AI: 98% implicit advantage
SoundHound specializes in conversation intelligence solutions, or voice artificial intelligence (AI) products that can be integrated into smart devices. The technology has applications in various industries, from automotive and consumer electronics to restaurants and customer service. And the company has won several high-profile customerslike Stellantis, ToastAnd Qualcomm.
SoundHound is a small company competing with giants like Amazon And Microsoft. But management believes it has better technology and a more flexible platform than its competitors, making it easier for brands to build differentiated and customized voice AI solutions.
SoundHound is growing very quickly, but the company has not yet made a profit. Revenue rose 54% to $13.5 million in the second quarter. Meanwhile, non-GAAP (generally accepted accounting principle) net income was negative $14.8 million, a slight improvement from $16 million in the prior year.
Earlier this year, SoundHound completed its $25 million acquisition of SYNQ3 Restaurant Solutions, a company specializing in conversational intelligence for food and beverage brands. That deal made SoundHound the largest provider of voice AI technology for restaurants. More recently, SoundHound completed its $80 million acquisition of Amelia, a recognized leader in enterprise AI platforms, expanding its customer service reach.
Looking ahead, Wall Street expects revenue to grow 96% annually through 2025, meaning analysts expect an acceleration in the coming quarters. That consensus estimate makes the current valuation of 24.2 times sales seem acceptable. Patient investors who are comfortable with risk and volatility may consider buying a small position today, but not with the expectation of a 98% upside in the next year.
Tesla: 1,040% implied upside potential
Tesla is the global leader in battery electric vehicles (BEVs), but its market share is declining in the United States and Europe. The company accounted for 17.6% of global BEV sales year to date through July, down 3.3 percentage points from the previous year.
But investors shouldn’t worry too much. A loss of market share is inevitable as the landscape becomes more competitive and the challenging economic environment currently pushes consumers towards cheaper options.
More importantly, Tesla believes that fully self-driving technology (FSD) will be the main source of profitability in the future. The company already makes revenue from FSD through subscription sales, but CEO Elon Musk has talked about licensing the technology to other automakers. Additionally, Tesla plans to launch an autonomous taxi company at some point. The company hasn’t set a specific date, but information may come when Tesla unveils its robotaxi on October 10.
Tesla reported disappointing financial results in the second quarter. Revenue rose 2% to $25.5 billion, and GAAP net income fell 45% to $1.5 billion. The company has now missed earnings estimates for four quarters in a row. Factors contributing to this trend include price reductions intended to stimulate demand and costs associated with ramping up Cybertruck production.
Looking ahead, Tesla is one of the companies best positioned to make money from autonomous driving technology. The large, growing fleet of FSD-enabled vehicles supports data collection at a scale that no other automaker can match, and quality data is essential for training machine learning models. Ark Invest estimates that Tesla autonomous driving collects data 110 times faster than Alphabet‘s Waymo.
Wall Street expects Tesla’s adjusted profits to rise 21% annually through 2025. That estimate makes the current valuation of 98 times adjusted earnings look expensive. At that price, investors buying shares today should do so in a very conservative manner. That means starting small and building the position over time.
Ark Invest’s price target implies a market cap of over $9 trillion by 2029. I think Tesla could eventually reach that milestone depending on how well it executes its robotaxi vision, but I’m skeptical about the timeline. The stock would need to return about 57% annually for Tesla to reach $9 trillion in 2029. So I would advise investors to set their expectations much lower.
Should You Invest $1,000 in Tesla Now?
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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennevine has positions in Amazon, Nvidia and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Microsoft, Nvidia, Qualcomm, Tesla and Toast. The Motley Fool recommends Stellantis and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has one disclosure policy.
2 Artificial Intelligence (AI) Stocks to Buy Before They Soar 98% and 1,040%, According to Certain Wall Street Analysts (Hint: Not Nvidia) was originally published by The Motley Fool