Nobody ever got filthy rich without taking some risk. Artificial intelligence (AI) is here, and the long-term opportunity could be worth trillions of dollars. Today, many investors are flocking to industry leaders like Nvidia who seem firmly entrenched in the industry's bright future.
That's all fine, but a skyrocketing company like Nvidia is already worth over a trillion dollars. Life-changing investment returns will likely come from small, innovative disruptors today that grew to become the household names of the future.
These three stocks all have that potential.
Be warned, these companies are still starting out and carry lots of risk. But if things work out, they could define an investing career. Getting one of these early investments right can make up for many misses.
1. SoundHound AI
NASDAQ: SOUN
Key Data Points
AI advancements aren't just about what you read or write, but what you say and hear. SoundHound AI (SOUN 1.76%) develops AI technology for sound recognition and audio processing. Its software is used for virtual assistants in the automotive industry, to process orders in restaurants, in automated call centers, and with smart electronic devices.
SoundHound AI's technology works in 25 languages and is protected by 120 granted patents, with another 140 pending. You can see below that the company has very little revenue today, just $38 million over the past year. However, its cumulative backlog totals $342 million, so future revenue growth looks strong. Management believes the company's total addressable market will surpass $160 billion by 2026.
SOUN Revenue (TTM) data by YCharts
Importantly, SoundHound AI has competition from more prominent tech companies but believes that its technology is superior because of its independence and wide-ranging capabilities. And at a market cap under $500 million, SoundHound doesn't need to capture the whole market. If it continues growing and establishes enough pricing power to turn profitable, the stock could be a home run from its current small size.
2. SentinelOne
NYSE: S
Key Data Points
Cybersecurity has existed since the dawn of the internet, but the industry is revolutionizing. Antivirus is becoming dated, giving way to next-generation solutions from companies like SentinelOne (S 6.50%). The company's security platform, Singularity, uses AI to proactively hunt for potential threats and bad actors on endpoints (devices connected to a network).
The cybersecurity industry is chock-full of competition from legacy software companies and newer players with advanced solutions, like SentinelOne. Corporations have good reason to look toward high-end security. According to IBM, the average data breach can cost a corporation $4.45 million. SentinelOne's technology helps it stand out. The company has received recognition from third parties like Gartner for its high level of performance and efficacy in mitigating threats.
S Revenue (TTM) data by YCharts
SentinelOne continues to grow, and its financials have rapidly improved, putting profitability within sight over the next few years. SentinelOne's management is also releasing new products, like Purple AI, a generative AI to aid its core product, and Singularity Data Lake, which helps organizations securely store and analyze data. The continual innovation could create excellent outcomes for investors over the coming years.
3. Lemonade
NYSE: LMND
Key Data Points
Insurance isn't an industry where you initially think of AI, but Lemonade (LMND 2.12%) has built its business around it. Traditional insurance companies rely on agents to sell policies and manage claims. Lemonade cut that layer of cost out of its business and instead uses AI chatbots to write policies in as little as 90 seconds and pay claims in three minutes.
Users also like the company's new-age approach. Lemonade has amassed a customer base of over 2 million policyholders. There's a massive growth opportunity ahead, too. There are over 250 million adults in the U.S. alone, and Lemonade has expanded its offerings to include renters, homeowners, car, pet, and life insurance.
LMND Revenue (TTM) data by YCharts
No, Lemonade isn't profitable today, but while doubling from 1 million customers to 2 million, its total premium fees increased by 3.5 times. Additionally, the company is still well funded, with $945 million in cash on its balance sheet against net cash usage of $103 million through nine months of 2023.
Lemonade could take years to grow and mature, so having deep pockets should help investors remain patient. The juice will be worth the squeeze if Lemonade grows into a nationwide mainstream insurance company.
