The rise of artificial intelligence (AI) technology offers the promise of wealth-building returns for investors who hold the right stocks. Estimates suggest that the productivity gains driven by AI could add trillions of dollars to the world economy over the long term.
After a great run over the last few years, the market's leading AI stocks have pulled back somewhat this year. Investors who remain focused on the long-term market trends could take this correction as an opportunity to set themselves up for greater profits down the road. Here are two stocks trading well off their highs that are worth buying now.
1. SoundHound AI
SoundHound AI (SOUN 1.91%) is a leader in voice assistant technology, and it's experiencing robust revenue growth. However, after the stock soared in 2024, it is down 49% year to date. Much of that slide took place after an SEC filing revealed that AI chip leader Nvidia had sold its stake in the small company. However, a closer look at the situation indicates that the sell-off was an overreaction that has set up a great buying opportunity.
NASDAQ: SOUN
Key Data Points
SoundHound and Nvidia have been working together on AI solutions for vehicles. Their partnership was featured at CES earlier this year, and SoundHound will be presenting at Nvidia's upcoming GTC 2025, where it is expected to show demos of its voice assistant technology using generative AI with the Nvidia DRIVE AGX system.
SoundHound's top line nearly doubled in 2024, which partially reflects the additional revenue that came from its acquisition of Amelia. This acquisition is helping SoundHound expand its addressable market beyond vehicles and restaurants and into the retail, banking, and healthcare sectors. In Q4, SoundHound also expanded into energy after making a deal with one of the largest electric utilities in the U.S.
Its future is looking bright. Management indicated during the Q4 earnings call that the company has a strong pipeline of new opportunities, and it continues to focus on adding new capabilities to its products to increase their value for customers. The company raised its 2025 revenue guidance to a range of $157 million to $177 million, which would be an increase of 96% at the midpoint.
Trading at a price-to-sales ratio of 45, the stock looks expensive, but the company should be able to grow into its valuation. SoundHound is a mid-cap company with enormous potential. Its market cap is $4 billion now -- but it could be worth significantly more in 10 years.
2. Dell Technologies
Tech companies are spending billions to expand their computing infrastructure to handle AI workloads. Statista estimates that the global AI server market will grow from $31 billion in 2023 to $430 billion by 2033, and Dell Technologies (DELL +8.92%) is well positioned to benefit. Dell generates the majority of its revenue from selling PCs and related accessories, but 46% comes from its infrastructure solutions group, which includes servers.
The stock is down 46% from the all-time peak it touched in 2024 and off 17% year to date as concerns over tariffs and the impact that trade conflicts could have on Dell's supply chain create near-term uncertainties about the company's outlook. Dell believes it has a resilient supply chain and that it will be able to navigate these obstacles, but its long-term opportunities far outweigh any near-term impacts that tariffs could have on its costs.
NYSE: DELL
Key Data Points
Dell recently signed a deal with xAI, the creator of the Grok large language model, extending its AI server backlog to $9 billion. The company's infrastructure solutions business grew revenue by 29% in 2024 to $43.6 billion, which offset the weak sales of its PCs. Dell expects revenue and adjusted earnings per share to increase by 8% and 14%, respectively, in 2025, driven by server demand.
Dell also continues to grow its sales of traditional servers and storage solutions. Its PowerStore product has experienced strong demand over the last four consecutive quarters. This shows how the company is providing differentiated services beyond simply selling servers, adding value for customers and cementing its leadership in the market.
Dell forecasts that the addressable market for AI hardware and services will grow at an annualized rate of 33% over the next several years to $295 billion by 2027. Its PC business should experience improving demand over the next few years as businesses and consumers upgrade to AI-capable PCs. The end of Microsoft's support for Windows 10 could also be a catalyst for stronger PC sales.
Importantly, Dell stock is cheap, trading at just 10 times 2025 earnings estimates, and at the current share price, its dividend has a forward yield of 2.2%. This valuation reflects the low expectations for Dell's PC business, but strong demand for Dell's infrastructure solutions is driving double-digit percentage earnings growth, which points to substantial return potential for Dell investors.
