Nvidia‘s (NASDAQ: NVDA) stock has been an absolutely incredible performer recently. Since the start of 2023, it rose by more than 800%. Most investors would be thrilled to own a stock that delivered returns like that, but not every company has the potential. It requires a massive growth catalyst to justify such gains.

SoundHound AI (NASDAQ: SOUN) is one company that could have this potential. It’s a key player in one niche of the artificial intelligence (AI) sector, and has a massive backlog for its products.

SoundHound’s product is gaining momentum

SoundHound AI’s technology can parse human speech and perform various tasks based on what it hears. Among the ways it’s already being used most are in processing restaurant orders and improving digital assistants in vehicles, but its capabilities extend far beyond those two use cases.

In the automotive segment, SoundHound partnered with Stellantis; the giant automaker will integrate SoundHound’s tech into its vehicles across Europe and Japan. This will give people access to generative AI functions while they’re driving — an improvement from the voice assistants that are available on vehicles today. If SoundHound can win business with other automakers and break into other regions, this segment of its business alone could provide it with a huge amount of growth.

SoundHound also worked with several companies in the restaurant sector to automate telephone and drive-thru orders, which saves restaurants on wages. According to the company, these AI assistants actually outperform humans in terms of order speed and accuracy, so the customer doesn’t feel like the experience declined. Some of SoundHound’s restaurant customers, among them White Castle and Jersey Mike’s, are fairly big, but there’s serious room for it to grow if it can capture some of the largest fast-food businesses.

SoundHound AI could achieve even greater success if its solutions are utilized in new applications.

But is that potential enough to make its stock the next Nvidia?

Nvidia has one key advantage that SoundHound does not

In the second quarter, SoundHound generated $13.5 million in revenue, which was up 54% year over year. That’s quite small compared to other AI businesses.

However, the key figure investors should focus on is SoundHound’s backlog, which totals $723 million. This figure doubled from a year ago, showing that rising demand has outpaced SoundHound’s capability to integrate its product with its customers’ systems.

This is factoring into SoundHound’s current valuation, as Wall Street has high hopes for the company.

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Trading at 23 times sales, SoundHound stock already carries a premium valuation. By contrast, Nvidia traded for around 15 times forward earnings at the start of 2023. That was a dirt-cheap price, and also a far cry from the forward earnings ratio of 47 it trades at today.

SoundHound already has a premium price tag, which detracts from its growth potential from here. But if it can mature into a business that generates $100 million in revenue per quarter, Nvidia-like performance for the stock is still possible.

If SoundHound achieved that and carried a valuation of 20 times sales, it would be worth $8 billion, up 370% from its market cap today. That would be a solid return, but still far less than what Nvidia produced.

SoundHound stock’s premium price tag may prevent it from delivering Nvidia-like returns from here, but that doesn’t mean it won’t be a great investment. However, it’s a bit of a long shot considering the niche use cases for its product and the company’s small size. It could make investors some serious money, but don’t expect Nvidia-like returns.

Should you invest $1,000 in SoundHound AI right now?

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Could Buying SoundHound AI Now Be Like Buying Nvidia in 2023? was originally published by The Motley Fool

BEIJING (Reuters) -China urged the European Union on Saturday not to conduct separate negotiations over the price of China-made electric vehicles sold in the EU, warning that this would “shake the foundations” of bilateral tariff negotiations.

“If the European side, while negotiating with China, conducts separate price commitment negotiations with some companies, it will shake the foundation and mutual trust of the negotiations … and be detrimental to advancing the overall negotiation process,” China’s Ministry of Commerce said in comments published on its website.

It didn’t cite any evidence for the EU carrying out these separate talks beyond saying there had been “relevant reports”.

The comments come days after Brussels rejected a Chinese proposal for EVs made in China to be sold within the bloc at a minimum price of 30,000 euros ($32,000), a move Beijing hoped would avert EU tariffs being imposed next month.

Various manufacturers including European-owned companies in China have authorized the China Chamber of Commerce for Machinery and Electronics to propose a price commitment plan that represents the overall position of the industry, the commerce ministry said.

“This is the basis for the current China-EU consultations,” it added.

(Reporting by Eduardo Baptista; Editing by William Mallard and David Holmes)

The bull market in the S&P 500 (^GSPC) began two years ago and is showing few signs of slowing.

Backed by the rise of artificial intelligence euphoria and a surprisingly resilient US economy, the S&P 500 has gained more than 60% in the past two years and is hovering near an all-time high.

Wall Street strategists who spoke with Yahoo Finance believe the bull can keep running wild. Barring any unexpected shocks, the path higher appears to be clear, with earnings growth expected to keep accelerating and the economy on seemingly solid footing as the Federal Reserve cuts interest rates.

A bull market for the S&P 500 was officially declared in June 2023 when the index rose 20% from its recent bear market low. History says this bull market still has legs. At two years, the bull market is well shy of the average run of 5.5 years. And the total return thus far, about 60%, is a far cry from the average 180% gain, per research from Carson Group chief market strategist Ryan Detrick.

In the past few weeks, several Wall Street equity strategists have made the case for the benchmark index to rise further into both year-end and into 2025, supported by accelerating earnings for the S&P 500.

“We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted,” BMO Capital Markets chief investment strategist Brian Belski wrote in a September note when raising his year-end price target for the S&P 500 to a Street high of 6,100 from a previous target of 5,600.

On Oct. 4, Goldman Sachs boosted its year-end target to 6,000 and initiated a 12-month target of 6,300. Goldman Sachs chief equity strategist David Kostin did note, though, that already high valuations could limit the upside for how far the index can reach in 2025.

Risks to the rally

Strategists who spoke with Yahoo Finance agreed with Kostin that already stretched valuations present a challenge to how much higher stocks can go. Charles Schwab senior investment strategist Kevin Gordon noted that dating back to the mid-1960s, the only time valuations have been this stretched on a trailing 12-month price-to-earnings ratio were 2021 and the dot-com bubble of the late 1990s.

“This would tell you that the bull is much older or somewhat near the end of this life,” Gordon said.

But strategists often warn that a high valuation itself isn’t a proper tool for calling the end of a bull market. Stocks can trade at what are considered to be expensive valuations for longer than expected. What that does tell investors is that much of the good news that could push stocks higher might’ve already been priced in.

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“If you look at what the market’s discounting right now, we’d say front and center, a big chunk of what’s being priced in is a soft landing sentiment,” Citi equity strategist Scott Chronert told Yahoo Finance.

Piper Sandler chief investment strategist Michael Kantrowitz noted that high valuations themselves aren’t why bull markets end. There needs to be a catalyst. He explained there are two common reasons market drawdowns happen: a spike in interest rates or a rise in the unemployment rate.

With inflation well off the boil of 2022 and the recent increase in unemployment stalling out, neither of the two downside catalysts are clearly in view.

There could, of course, be a surprise no one sees coming. But “it’s a little bit harder to see where the shock comes from,” Chronert said. “If things continue to play out incrementally, investors can handle a little bit of a change [to the economic narrative] here, a little bit of a change there … It’s when you get a more immediate unraveling, and it’s hard to really say that immediate unraveling is going to come.”

This sets the market up for a narrative shift. To Kantrowitz, the currently expensive valuations show that the bull market is likely moving from a macro-driven environment, where factors like inflation falling and other signs of economic resilience have pushed stocks higher, to one that is more based on the fundamentals.

“For this market to continue moving higher, and particularly to determine what stocks lead, it’s going to be all about earnings,” Kantrowitz said.

The bar for earnings remains high. Consensus estimates project earnings to grow nearly 10% in 2024 and almost 15% in 2025. The key for investors remains finding which sectors are seeing earnings growth accelerate rather than just staying steady.

And , according to Chronert, part of that story could come down to the two letters that defined the first part of the bull market: AI.

Chronert, who said his team is still a holder of the “Magnificent Seven” tech cohort, doesn’t doubt that the AI narrative will continue to manifest itself in the market. But after significant gains seen in those tech stocks over the past two years amid large earnings growth, focus may continue to shift to the broadening impact of AI on companies that aren’t making the AI chips or the cloud servers operating the new technology.

For AI to continue to have broader impact on the market and keep pushing earnings growth for the index above expectations, “you’ve got to have more companies delivering on the AI promise via margins [and] profitability metrics,” Chronert said.

He added, “It would be that sort of thesis that has to play out, and that’s going to take two to five years.”

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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There’s no wrong way to put your money to work on Wall Street, but some methods produce more reliable gains than others. If you’re looking for a relatively safe and easy way to grow the stream of income you’ll have to work with during your retirement years, buying dividend-paying stocks and holding them for long periods is a terrific option.

During the 50-year period that ended in 2023, dividend-paying stocks in the S&P 500 index returned 9.17% annually on average. That’s more than double the return produced by their non-dividend-paying cousins. During the same period, the average dividend non-payers in the benchmark index returned just 4.27% annually, according to Ned Davis Research and Hartford funds.

You don’t need to be rich to put your money to work for you. At the moment, shares of AT&T (NYSE: T), Hercules Capital (NYSE: HTGC), and Pfizer (NYSE: PFE) offer dividend yields of 5% or better, and you can buy a share of all three with less than $100. Adding them to a portfolio now gives you a good chance to outperform the market while they beef up your passive-income stream.

1. AT&T

AT&T lowered its dividend payout in 2022 to adjust for the sale of its unpredictable media assets. Now that it’s strictly a telecommunications business, the cash flows it uses to make dividend payments should be extra reliable. At recent prices, the stock offers a 5.2% dividend yield.

Traditional-wireline subscriptions are still shrinking, but this headwind is easily overcome by demand for services that run on its 5G network and a growing web of fiber-optic cables. In the second quarter, mobility-service revenue rose 3.4% year over year, and this isn’t the only operation driving growth.

The three-month period ended June 30 was the 18th consecutive quarter in which AT&T added over 200,000 new fiber-internet subscribers. Late last year, the company also launched a fixed-wireless service for folks who aren’t located next to fiber optic cables. As a result, Q2 consumer-broadband sales rose 7% year over year.

At $2.7 billion in Q2, consumer broadband is responsible for less than 10% of total revenue. AT&T is one of just three telecom companies with a nationwide 5G network, so investors can reasonably rely on its consumer-broadband business to drive growth for many years to come.

2. Hercules Capital

Hercules Capital is a business development company (BDC), which means it can avoid income taxes by giving nearly all of its earnings to shareholders as a dividend payment. At recent prices, the stock’s regular distribution offers a big 8% yield.

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Hercules also offers a supplemental dividend that it set at $0.32 per share this year. If next year’s supplemental dividend remains unchanged, investors who buy this stock at recent prices will receive a 9.7% yield.

Most BDCs originate relatively high-interest loans to established mid-sized businesses that already earn money. Hercules Capital takes a riskier approach to financing by engaging start-ups in the life science and technology industries before they have any recurring revenues to report.

In isolation, the bets Hercules makes are extremely risky. The potential payoffs are so large, though, that the company can report strong-earnings growth if just a fraction of its investments succeed.

Hercules has raised or maintained its regular distribution since 2010, and continued movement in the right direction seems likely. In the first half of 2024, the BDC reported $1.07 billion in total-gross funding, which was 28% more than the previous-year period.

3. Pfizer

Sales of Pfizer’s COVID-19 vaccine and antiviral treatment broke records regarding its rate of growth and decline. Sales of Comirnaty and Paxlovid shot up to a combined $56.7 billion in 2022. Less than a year and a half later, sales of the same two drugs collapsed to an annualized $1.8 billion.

Don’t let its recent ups and downs confuse you. Pfizer is a reliable dividend payer that has raised its payout every year since 2009. At recent prices, it offers a 5.7% yield that will be easier to predict now that sinking sales of its COVID-19 products are responsible for less than 3% of total revenue.

Pfizer’s dividend payout is supported by one of the largest catalogs of drugs with patent-protected market exclusivity. In the first half of 2024, a dozen of its products grew sales by a double-digit percentage compared to the previous year period.

One of the investments Pfizer made with its pandemic-related earnings haul was the $43 billion acquisition of cancer drug developer Seagen. The purchase gave Pfizer access to four commercial-stage treatments, including Padcev. In late 2023, Padcev became a chemotherapy-free option for newly diagnosed bladder cancer patients. As such, sales are expected to reach $8 billion annually by 2030.

Padcev is one of several blockbuster drugs that could help Pfizer continue its dividend-raising streak. Adding some shares to a diverse portfolio now seems like the right move.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,022!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,329!*

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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.

3 Reliable Dividend Stocks With Yields Above 5% That You Can Buy With Less Than $100 Right Now was originally published by The Motley Fool