SoundHound AI, SentinelOne and AppLovin have the potential to be big winners.
Nvidia (NVDA 2.01%) has been one of the best-performing stocks of the past five years, creating a number of millionaires along the way, but looking back at its strong returns, investors today might be better off searching for the next potential big winner.
These three small technology companies have the potential to grow rapidly in the coming years.
1. SoundHound AI
SoundHound AI (SOUN -0.20% ) first caught investor attention after it was revealed that Nvidia was investing in the company. The company employs an artificial intelligence (AI) voice platform that uses speech-to-meaning and deep semantic technologies to process speech in real time, understand the speaker’s intent and respond to complex questions, utterances and requests.
The company initially found some success in the automotive industry, with several automakers now using the technology as the interface for their vehicle voice assistants. SoundHound has since gained traction in the restaurant industry, where it is used by both restaurateurs and restaurant-focused fintech companies like Toast and Olo.
More recently, SoundHound acquired Amelia, a conversational generative AI platform used for customer service, employee onboarding, and back-office operations. The acquisition will enable SoundHound to expand into other industries, such as healthcare, retail finance, and insurance, creating many opportunities for cross-selling and upselling.
Though SoundHound is a speculative investment, it could be a millionaire-making stock if it becomes the standard in AI voice technology.
Image source: Getty Images.
2. Sentinel One
Cybersecurity company SentinelOne (S 0.06%) specializes in endpoint security, protecting networks and their endpoints (such as smartphones and computers). Through its Singularity Platform, the company uses AI agents to not only monitor threats, but also predict and eliminate them. Additionally, in the event of a cyberattack, SentinelOne can “rewind” the systems it protects to a previous state, freeing clients from the need for time-consuming manual incident cleanup.
SentinelOne is well-positioned to capitalize on the global IT outage caused by CrowdStrike earlier this year with a faulty software update. Being much smaller, SentinelOne doesn’t need to poach a ton of business from an industry giant to make a big profit from the incident.
Meanwhile, the company signed a multiyear deal with enterprise personal computer (PC) vendor Lenovo to provide endpoint security for all of the company’s new PCs and give existing owners of Lenovo hardware the option to upgrade their security to the Singularity platform, which Lenovo also plans to use to build a new managed detection and response (MDR) service.
The company is already growing revenue at a rapid pace, including a 33% year-over-year increase in the second quarter, and deals like the Lenovo deal could help that growth accelerate. Based on analyst estimates for next year, the company’s shares are trading at 7.5 times expected sales, making it a cheap stock compared to larger peers and a potential millionaire-maker.
S PS Ratios (1 year ahead) data from YCharts.
3. AppLab
Don’t let the silly name fool you: AppLovin (APP 1.01%) is one of the biggest beneficiaries of the AI revolution outside of Nvidia. Since launching its Axon 2 AI-based advertising solution, the company’s software platform revenue has skyrocketed.
AppLovin has traditionally focused on mobile gaming companies, who use its solutions to acquire new customers and drive revenue from their games. Since the launch of Axon 2, mobile app companies have flocked to the company’s solutions, and AppLovin’s revenue has soared while rival Unity Software’s ad business (called Grow Solutions) has slumped. In the second quarter, AppLovin’s software platform revenue grew 75%, while Unity’s fell 9%.
The stock isn’t overvalued, with a forward P/E ratio of 24.5 based on analyst estimates for next year and a price-to-earnings growth (PEG) ratio of 0.5. Typically, a stock with a PEG ratio of less than 1 is considered cheap, so by this measure, AppLovin is essentially a bargain.
APP PE Ratio (1 Year Ahead) data from YCharts.
But the company’s billionaire status depends on it being able to expand its solutions beyond the mobile gaming market, which could lead to continued rapid revenue growth and potentially skyrocketing stock prices.
Geoffrey Seiler has invested in Toast. The Motley Fool has invested in and recommends CrowdStrike, Nvidia, Olo, Toast and Unity Software. The Motley Fool has a disclosure policy.
