While artificial intelligence (AI) is not a new concept, it has emerged as the most prominent investment trend in 2023. The launch of generative AI applications like ChatGPT, Bard, and Claude 2 has ignited significant interest. AI is also not a passing trend, considering that the technology is already well-entrenched in the daily lives of many people.

In this context, it makes sense for forward-looking investors to pick up positions in AI stocks with promising outlooks. SoundHound AI (SOUN -0.85%) and UiPath (PATH -3.08%) are two companies that stand a good chance of rising to prominence in the next decade. Let's analyze them further.

SoundHound AI

SoundHound is a prominent name in AI-powered audio technology. Thanks to the robust adoption of its AI-driven voice and speech solutions, SoundHound AI has seen a rapid addition of new customers and increasing usage from existing customers.

The company is especially focused on two markets: the automotive industry, wherein voice and audio recognition can be used to enhance safety and user experience; and the restaurant industry, wherein voice commands can improve efficiency and customer experience in areas such as reservations and placing food orders.

SoundHound has differentiated itself from the competition such as Microsoft and Alphabet's Google by offering voice services that are highly customizable. Plus, unlike several other AI solutions that convert speech to text and derive meaning from the text, the company's technology extracts meaning directly from speech. This, in turn, improves speed and accuracy.

Although SoundHound AI is not yet profitable, the recent financials raise hopes. In the second quarter, revenue soared by 42% year over year to $8.8 million, while a loss per share of $0.10 was an improvement from $0.19 in the prior year. The company has been investing heavily in research and development, which in turn should boost future performance.

Hence, SoundHound seems to be sacrificing near-term profitability for future growth -- a classic behavior of high-growth stocks in early phases. Management has also guided for revenue of $43 million to $50 million in fiscal 2023, implying a solid 49% year-over-year jump at the midpoint.

However, SoundHound AI is not without challenges. The company's cumulative bookings backlog (bookings from committed customer contracts) grew by only 20% year over year to $339 million in the second quarter. Since the growth rate is lower than the top-line growth, there are concerns about its future revenue growth trajectory.

Plus, the company also faces significant customer concentration risks since only three customers accounted for nearly 67% of the company's revenue in 2022. The shares are down by nearly 87% from their all-time high in May 2022. 

However, the fundamental story of this voice recognition specialist is strong, and its share price may rebound in the coming months. SoundHound AI's prowess in the voice recognition niche (with an addressable market of as much as $160 billion by 2026) is impressive. Considering the 40% or more year-over-year revenue growth rate and gradual progress toward profitability, investors can consider buying a small position in this stock.

UiPath

A leading robotic process automation (RPA) player, UiPath helps clients automate and scale repetitive, tedious, and low-skill tasks, thereby improving the latter's cost efficiency and overall productivity.

According to Gartner, the company accounts for nearly 35.8% share of the global RPA market, a dramatic improvement from the 1.6% share in 2016. And according to Grand View Research, the global RPA market is estimated to grow annually at a very impressive compound annual rate of 39.9% from $2.9 billion in 2023 to $30.8 billion in 2030.

UiPath has long been using AI and machine learning technologies to build its bots (programs used for automation). Recently, the company has started leveraging generative AI and specialized AI technologies to improve the speed and performance of its offerings as well as expand their usage across new use cases. The company's platform also allows clients to interact with large language models such as OpenAI's ChatGPT, Amazon's Falcon, and Alphabet's PaLM 2.

UiPath is not yet profitable, but its improving non-GAAP (adjusted) operating margins and positive free cash flow help build confidence. The company ended the second quarter with around 10,890 clients and posted robust growth in the number of high-value clients. The number of customers spending $1 million or more annually on the company's offerings rose by 30% year over year to 254. UiPath also reported remaining performance obligations of $905 million at the end of the second quarter, up 28% on a year-over-year basis. A solid growth in RPO is indicative of the company's robust order pipeline.

With access to huge troves of client data (which can help build smarter and more efficient bots) and the ability to seamlessly integrate generative AI capabilities across several platforms (belonging to technology giants), UiPath seems well-positioned to capture even more share of the burgeoning RPA market.