The rapid advancement of artificial intelligence (AI) technology presents an incredible opportunity for investors to achieve significant wealth-building returns by selecting the right stocks. Recent estimates suggest that the productivity gains fueled by AI could inject trillions of dollars into the global economy over the long run. This potential for growth is prompting many investors to reevaluate their portfolios and consider the long-term implications of AI on various sectors.
Despite a remarkable performance in previous years, many leading AI stocks have experienced a pullback this year. This market correction offers a unique opportunity for astute investors who remain focused on long-term trends, allowing them to position themselves for greater profits in the future. Below, we highlight two undervalued stocks that are currently trading well below their previous highs and present compelling buying opportunities.
1. Invest in SoundHound AI for Voice Assistant Innovations
SoundHound AI (SOUN 1.99%) stands out as a leader in the rapidly evolving voice assistant technology sector, and it is currently witnessing impressive revenue growth. However, after a significant surge in 2024, the stock has experienced a 49% decline year-to-date. Much of this drop followed an SEC filing that revealed AI chip giant Nvidia had divested its stake in this promising company. A deeper analysis suggests that this sell-off was an overreaction, presenting an excellent buying opportunity for savvy investors.
SoundHound’s collaboration with Nvidia focuses on developing AI solutions tailored for vehicles. Their partnership was prominently showcased at CES earlier this year, and SoundHound is slated to present at Nvidia’s upcoming GTC 2025 event, where it will demonstrate its innovative voice assistant technology powered by generative AI using the Nvidia DRIVE AGX system.
In 2024, SoundHound’s revenue nearly doubled, in part due to its strategic acquisition of Amelia, which is helping the company broaden its addressable market beyond just vehicles and restaurants, venturing into retail, banking, and healthcare sectors. In the fourth quarter, SoundHound also made significant strides into the energy sector by securing a partnership with one of the largest electric utility companies in the U.S.
Looking ahead, the future appears bright for SoundHound. During the fourth quarter earnings call, management highlighted a robust pipeline of new opportunities, emphasizing their commitment to enhancing product capabilities to deliver greater customer value. The company also raised its revenue guidance for 2025, projecting a range between $157 million and $177 million, which represents an impressive increase of 96% at the midpoint.
Although the stock is currently trading at a price-to-sales ratio of 45, which may seem high, the company’s growth potential suggests it can justify this valuation over time. As a mid-cap company with substantial upside, SoundHound’s current market cap stands at $4 billion, but analysts believe it could be worth significantly more in the next decade.
2. Seize the Opportunity with Dell Technologies for AI Infrastructure Growth
As technology companies invest billions to enhance their computing infrastructure to accommodate the increasing demands of AI workloads, Dell Technologies (DELL -1.68%) is strategically positioned to capitalize on this growth. According to Statista, the global AI server market is projected to expand dramatically from $31 billion in 2023 to an astounding $430 billion by 2033. While Dell generates a significant portion of its revenue from PC sales and related accessories, a noteworthy 46% of its income is derived from its infrastructure solutions group, which includes critical server technologies.
Currently, Dell’s stock is down 46% from its all-time high reached in 2024 and has declined 17% year-to-date due to rising concerns regarding tariffs and the potential impact of trade conflicts on Dell’s supply chain. Despite these near-term uncertainties, Dell remains confident in its resilient supply chain and believes the long-term opportunities far outweigh any immediate challenges posed by tariffs on its operational costs.
Recently, Dell secured a partnership with xAI, the creators of the Grok large language model, which has expanded its AI server backlog to an impressive $9 billion. The infrastructure solutions segment of Dell showcased robust revenue growth of 29% in 2024, reaching $43.6 billion, effectively offsetting weaker sales in its PC division. Looking ahead, Dell anticipates that revenue and adjusted earnings per share will rise by 8% and 14%, respectively, in 2025, primarily fueled by soaring server demand.
In addition to its server offerings, Dell continues to expand its sales of traditional servers and storage solutions. The strong demand for its PowerStore product has been evident over the past four quarters, demonstrating how Dell adds value for customers by providing differentiated services rather than merely selling hardware, further solidifying its leadership position 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, potentially reaching $295 billion by 2027. Moreover, the company’s PC division could see improved demand as both businesses and consumers upgrade to AI-capable PCs. Additionally, the impending end of Microsoft‘s support for Windows 10 may serve as a catalyst for stronger PC sales in the near future.
It’s also worth noting that Dell’s stock is currently trading at an attractive valuation, at just 10 times the 2025 earnings estimates, and offers a forward dividend yield of 2.2% at current share prices. This valuation reflects the market’s subdued expectations for Dell’s PC business; however, the strong demand for Dell’s infrastructure solutions is projected to drive double-digit percentage earnings growth, indicating significant return potential for investors in Dell.
John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.