Two AI-focused shares I'm Eager to Purchase During the Next Market Downturn
Artificial Intelligence (AI) is a broad and burgeoning field, encompassing various technologies. Generative AI, like ChatGPT, Perplexity, and Google Gemini, is a notable subset, predicted to grow by almost ten times by 2030. However, AI's reach extends beyond this, encompassing fields such as speech recognition, cybersecurity, weapons detection, autonomous vehicles, and robotics. Semiconductors form the backbone of these technologies.
When it comes to investment, focusing on robust companies and reasonable valuations is crucial, with Warren Buffett's mantra, 'Price is what you pay; value is what you get,' serving as a guiding principle.
In 2024, major indexes hit record highs multiple times, leading to heightened valuations for several excellent companies, which may induce market corrections, typically occurring once a year or so. As an investor, it can be beneficial to maintain a watchlist for investment opportunities during these corrections.
Two potential investments in this context are Arm Holdings and SoundHound AI.
- Arm Holdings (ARM): This unassuming company powers more than 99% of the world's smartphones, courtesy of its cutting-edge semiconductors. Arm's next frontier is AI, including generative AI, cloud computing, autonomous vehicles, drivers' assist, and more. As a semiconductor designer, Arm profits from licensing its technology and collecting royalties.
Arm reported $844 million in revenue in Q2 2025, showing 5% growth, albeit less than expected due to major deal timings. Despite this, Arm has a significant growth trajectory thanks to collaborations with tech giants like Meta.
However, Arm's valuation at nearly 40 times its sales for the fiscal year 2025 and 100 times its forecasted non-GAAP earnings for 2025 seems steep, potentially indicating that the fundamentals have outpaced the enthusiasm. In such a situation, waiting for a dip or implementing a risk mitigation strategy like dollar-cost averaging can be beneficial in buying this stock.
- SoundHound AI (SOUN): This company is synonymous with conversational intelligence, which powers advanced voice commands in vehicles, phone orders, and AI-led customer service. SoundHound AI's impressive list of partnerships with major brands is driving significant revenue growth.
The company reported an 89% year-over-year increase in sales in Q3, with expectations of $82 million in revenue for 2024 and $155-$175 million in 2025. Despite this, the stock's valuation seems high, trading at 60 times its 2024 sales forecast and 30 times its midpoint 2025 sales guidance.
Investors may not have to wait long for a potential buying opportunity, considering SoundHound AI's stock price drop from recent highs. A continued decline may present a valuable entry point for investors.
AI is a thriving market with immense potential, and investors should consider owning several AI stocks. While market fervor may wane, opportunities for investment always lurk around the corner. Maintaining a watchlist, particularly during market corrections, is an excellent way to capitalize on these opportunities.
In the realm of finance and investing, it's important to keep an eye on AI-related companies that have the potential for significant growth. For instance, Arm Holdings, with its semiconductor technology powering more than 99% of smartphones and its focus on AI, could be a promising investment, despite its high valuation.
In the context of money management, maintaining a watchlist for such stocks during market corrections can provide investors with potential buying opportunities at more reasonable prices.
