InvestorPlace Contributor Names 3 Underrated AI Stocks to Consider Instead of Nvidia

Investors looking for promising companies beyond the typical AI heavyweights should consider AMD, Innodata and SoundHound AI, writes Yiannis ZourmpanosInvestorPlace contributor and founder of stock research platform Yiazou Capital Research. These companies are of different sizes: AMD has a market cap of over $275 billion, while the other two are much smaller. However, they share characteristics such as rapid sales growth and Big Tech customers.

Advanced Micro Devices (AMD)

With a market capitalization of $277.8 billion, AMD produces integrated circuits, electronic components, processors, adapters and chipsets. In the first quarter of 2024, the company recorded an operating profit of $1.1 billion with an operating margin of 21%. The company’s profitability is increasing, reinforced by an increase in sales and effective cost control, notes Zourmpanos.

He included AMD in his list of undervalued AI stocks because of the rapid adoption of its MI300X GPUs for AI applications. Those processors, Zourmpanos notes, have been the fastest-growing product in AMD’s history.

Additionally, more and more enterprises have started using AMD’s EPYC processors. EPYC-based cloud solutions are offered by Google, Oracle Cloud, Microsoft Azure, and others. Additionally, AMD processors have been adopted by American Airlines, Emirates Bank, and Shell, as reported in the company’s Q1 2024 presentation.

Innodata

Innodata, with a market cap of $430 million, provides data engineering services, including software platforms and AI-based services for AI data collection and annotation. Its customers include Big Tech companies, Zourmpanos notes. This year, Innodata was awarded an expansion of one of its large language model (LLM) development programs by one of its existing Magnificent Seven Big Tech customers, as noted in the company’s Q1 2024 report. The expansion is expected to add about $23.5 million to annual revenue. Another contract, signed in April, is expected to bring in about another $20 million. Overall, the company expects revenue to grow at least 40% in 2024. For comparison, its revenue grew 10% to $86.8 million in 2023.

Strategic expansions with Big Tech companies, as well as secured long-term contracts, are the main reasons why Zourmpanos chose Innodata for his list of underrated AI stocks.

AI SoundHound

With a market capitalization of $1.38 billion, SoundHound develops speech and sound recognition technologies. Its customers include hotels, restaurants and the automotive industry. For example, its restaurant solution can take orders, process and understand multiple languages, learn any menu, answer frequently asked questions and offer special promotions. Recently, SoundHound acquired SYNQ3 Restaurant Solutions, which Zourmpanos says will strengthen its position in the restaurant industry.

SoundHound develops automotive solutions in partnership with Nvidia and implements them with Stellantis (with brands such as Alfa Romeo, Chrysler, Citroën, Dodge, DS, Fiat, Jeep, Maserati, Opel, Peugeot and others).

The company reported first-quarter revenue increased 73% year-over-year to $11.6 million. The SYNQ3 acquisition and a strong order book strengthen SoundHound’s position on the list of underrated AI stocks, Zourmpanos concludes.