Building wealth is a lot like sailing a ship, if you think about it. You need the right direction, a solid plan, and patience with unpredictable weather conditions. And just like with a ship, even a small investment can really pay off.
Noticed how Advanced Micro Devices (NASDAQ: AMD) rose from relative obscurity to become a giant of the semiconductor industry in recent years? If you invested $3,000 in AMD stock five years ago, you’d have $21,640 today:
AMD Total Return Price data by YCharts
I’m not here to recommend AMD today, though. For that analysis, you can check out this video essay by my colleague, Eric Cuka.
Undoubtedly, there are stocks today that could go on to meet or beat AMD’s wealth-building returns, given enough time. Let’s examine two stocks that I believe can do precisely that.
1. CrowdStrike
CrowdStrike (NASDAQ: CRWD), a cloud-based cybersecurity company, has recently come under scrutiny, with some analysts suggesting that it’s not a good time to buy this stock. Wall Street pros are urging investors to wait for a more stable economy before buying CrowdStrike shares, since many clients are holding back security upgrade budgets these days.
Despite these negative opinions, CrowdStrike looks like a good long-term investment for several reasons.
First, the cybersecurity industry is growing rapidly, and CEOs are planning to invest more in cybersecurity and data privacy in 2023, according to a recent survey by PricewaterhouseCoopers. This could set CrowdStrike up to benefit from the consolidation trend in the industry, which is seeing companies consolidate their diverse security vendors under a single solution rather than buying products from many different providers.
CrowdStrike’s investment case also benefits from its business performance. As of Oct. 31, CrowdStrike had annual recurring revenue (ARR) of $2.34 billion, an increase of 54% year over year. Many growth stocks would sell their proverbial mothers for high-octane growth of this caliber.
Furthermore, CrowdStrike’s Falcon software platform has 23 products for customers to choose from, and 60% of its subscription customers have at least five modules. This powerful, diverse platform gives CrowdStrike a lot of room for growth within its current customer base, as well as opportunities for ongoing customer acquisition.
Finally, despite its recent stock price drop and concerns about slowing growth in 2023, the future still looks bright for CrowdStrike. The company’s remaining performance obligations (revenue collected against prepaid contracts) are at $2.8 billion, and 35% of that is expected to come in more than one year from now. That is the highest dollar amount ever, indicating that there is potential for growth in the future. Overall, the cybersecurity space is growing and consolidating.
The impressive financial performance of CrowdStrike, combined with its currently modest valuation, positions it as a highly attractive investment opportunity. I anticipate CrowdStrike to embark on a journey of substantial shareholder returns, similar to AMD’s recent rise.
This growth is likely to commence in the near future, perhaps even within the next few months. Luck favors the prepared, so you might as well get ready for the jump by grabbing a few CrowdStrike shares while they’re reasonably cheap.
2. SoundHound AI
Let’s dip a toe into the piping-hot artificial intelligence (AI) market.
SoundHound AI (NASDAQ: SOUN) provides AI-powered speech recognition, transcription, and computer-generated speech for an impressive range of well-known clients, and is becoming increasingly popular as AI becomes more in demand.
When you’re giving voice commands to the Netflix app on your smart TV, placing an automated phone order with your favorite restaurant, or barking commands at your smartphone based on Qualcomm chips, you may very well be talking to an AI system from SoundHound. The company has an impressive list of contracts and partnerships.
SoundHound is staring down a massive target market on a global scale. The company recently landed $25 million in private equity funding, which should help it hold down the fort until it starts generating cash profits (expected before the end of 2023).
Although SoundHound shares have experienced a decline in price, falling nearly 80% since the peak in May 2022, this does not reflect the company’s prospects. SoundHound’s bookings backlog is over $300 million and rising fast. As a result, the company projects revenue growth of over 50% this year, with realistic expectations of positive bottom-line profits. SoundHound AI’s long-term opportunities look excellent as AI continues to become increasingly adopted in customer service functions and everyday life, which should benefit SoundHound tremendously.
While investing in SoundHound may look risky, it is also a very exciting investment opportunity. This is AI in the service of an improved consumer experience, and SoundHound controls a very small sliver of a huge market today. Investing $3,000 or less in SoundHound at these rock-bottom prices could serve you well in the long run.
SoundHound is a deceivingly experienced little company that should provide a great return on investment in the long run. This stock is positioned to make AMD investors downright jealous a few years down the road.
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Anders Bylund has positions in Netflix. The Motley Fool has positions in and recommends Advanced Micro Devices, CrowdStrike, Netflix, and Qualcomm. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
