The rise of artificial intelligence (AI) technology is projected to significantly benefit investors holding the right stocks, with estimates suggesting that productivity gains could add trillions of dollars to the global economy in the long term.
After experiencing a strong performance in recent years, several leading AI stocks have corrected in value this year, presenting potential buying opportunities for long-term investors. Five companies notably seeing sharp declines include SoundHound AI, Dell Technologies, Nvidia, Alphabet, and Taiwan Semiconductor.
1. SoundHound AI
SoundHound AI, a leader in voice assistant technology, has witnessed a 49% drop year to date after its stock surged in 2024. The decline followed an SEC filing which revealed that Nvidia had sold its stake in SoundHound, leading to what analysts describe as an overreaction in the market. SoundHound and Nvidia have collaborated on AI solutions for vehicles, which was highlighted at CES earlier this year. Upcoming presentations at Nvidia’s GTC 2025 will showcase SoundHound’s generative AI technology using the Nvidia DRIVE AGX system.
SoundHound’s revenue nearly doubled in 2024, partly attributed to the acquisition of Amelia, which allows for an expansion into sectors like retail, banking, and healthcare. In Q4, the company secured a deal with a major U.S. electric utility, marking its entry into the energy sector. Management has indicated a strong pipeline of new opportunities, raising its 2025 revenue guidance to between $157 million and $177 million, an increase of 96% at the midpoint. While SoundHound’s stock trades at a high price-to-sales ratio of 45, its potential growth could justify this valuation in the future.
2. Dell Technologies
Dell Technologies is poised to benefit from significant investments in AI infrastructure, with the global AI server market projected to grow from $31 billion in 2023 to $430 billion by 2033. Despite a 46% drop from its all-time peak in 2024 and a 17% decline year to date due to tariff concerns, Dell’s infrastructure solutions group, which accounts for 46% of its revenue, continues to perform well. The company’s infrastructure solutions revenue grew by 29% in 2024 to reach $43.6 billion, compensating for weak PC sales.
Recently, Dell extended its AI server backlog to $9 billion through a partnership with xAI, the creator of the Grok large language model. Dell forecasts an 8% increase in revenue and a 14% rise in adjusted earnings per share for 2025, driven by strong server demand. The company also reported robust sales for its PowerStore product and forecasts a 33% annual growth rate for the AI hardware and services market, estimating that its PC segment will improve as consumers and businesses transition to AI-capable devices. Dell’s stock is currently trading at just 10 times 2025 earnings estimates and offers a forward dividend yield of 2.2%.
3. Nvidia
Nvidia remains integral to the AI sector, with its graphics processing units (GPUs) providing essential computing power for training AI models. Despite concerns over potential declines in GPU demand, Nvidia expects significant growth, projecting a 65% year-over-year increase to $43 billion in the first quarter of fiscal 2026, driven by its new Blackwell chip generation. Analysts forecast a 56% revenue growth for fiscal 2026, yet Nvidia’s stock currently trades at less than 26 times forward earnings, its lowest valuation in the past year.
4. Alphabet
Alphabet‘s stock appears even more favorable, trading at just 21 times trailing earnings and 19 times forward earnings. In comparison, the S&P 500 averages 23.9 times trailing earnings and 21.6 times forward earnings. Alphabet’s robust business model, primarily powered by Google search advertising, showed a 12% revenue growth and a 31% earnings-per-share increase in Q4. Analysts anticipate an 11% revenue growth for both 2025 and 2026, positioning Alphabet as a potential outperformer in the coming years.
5. TSMC
Taiwan Semiconductor Manufacturing Company (TSMC) has addressed potential tariff threats with a $100 billion investment in the U.S. to establish three fabrication facilities, two packaging facilities, and a research-and-development center, supplementing a previous $65 billion commitment. This strategic move enhances TSMC’s standing in the semiconductor industry, which is crucial to current and future AI advancements.
TSMC forecasts that revenue from AI-related chips will grow at a compound annual growth rate of 45% over the next five years, while the overall revenue growth is projected at 20% in the same timeframe. Despite its importance in the AI arms race, TSMC’s stock is trading at merely 19.8 times forward earnings, indicating it may be undervalued relative to its growth prospects.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: Kerem Gülen/Ideogram
