These 2 Growth Stocks Could Turn Into $100 Billion Giants

Key Points

• SoundHound AI estimates its addressable market for its voice AI solutions at $140 billion.

• Duolingo is using AI to bring innovation to the $7 trillion global education market.

• 10 stocks we like better than SoundHound AI ›

If you're looking for high-growth stocks to fuel your portfolio, you've come to the right place. Even as the major market indices race to new highs this year, there continue to be great opportunities to find long-term winners among relatively small companies that are disrupting or supercharging the growth of a new industry.

Let's look at two innovative companies that could deliver explosive gains for investors.

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1. SoundHound AI

As the adoption of artificial intelligence (AI) grows, one market expected to see explosive demand in the coming years is voice AI solutions. SoundHound AI (NASDAQ: SOUN) is a small company with a market cap of $5 billion, but it has been investing in speech recognition technology for many years and is starting to see rapid growth in its business.

It just reported record second-quarter revenue of $42 million, up 217% over the year-ago quarter. SoundHound's voice AI solutions are being used for ordering at many popular restaurant chains and in-car voice assistants for some automotive brands, and it continues to see significant demand across these markets.

The company's recent acquisition of Amelia expands its addressable market. Amelia adds clients from financial services, retail, and healthcare that could be pivotal for growing SoundHound into a much larger business over the next decade. Amelia's AI agents position SoundHound to offer voice AI solutions for customer support, compliance tasks, insurance claims processing, shopping, and more.

Using voice AI in retail could potentially be a lucrative business for SoundHound. This would turn SoundHound's voice assistants into revenue generators, as the company could charge small fees for every transaction completed using its technology.

While SoundHound currently operates at a loss, it should be able to scale into a profitable business as it penetrates new markets and revenue opportunities. For example, management estimates that in-car voice commerce could be a $35 billion opportunity, which includes revenue from subscriptions, transactions, data brokerage, and advertising.

For the stock to be worth $100 billion, SoundHound will need to grow its annual revenue well into the billions, perhaps as high as $10 billion, with a price-to-sales multiple of 10. Management has previously estimated its total addressable market at $140 billion. This is achievable if SoundHound positions itself as the leading voice AI platform for businesses across multiple industries.

2. Duolingo

Duolingo (NASDAQ: DUOL) is a fast-growing mobile learning app with the potential to disrupt the $7 trillion global education market with its forward-thinking strategy centered around using AI and data to personalize the learning experience. The company started in 2012 and focused on language learning, but it is starting to expand into other courses like math and chess.

Duolingo has over 128 million monthly active users. But what's very telling about customer satisfaction is that daily active users (DAUs) are growing much faster than monthly users. DAUs increased by 40% year over year in Q2, compared to 24% for monthly users. This means more users are engaging with the app more frequently over time. This could reflect many things, but overall, it signals that people find Duolingo's courses valuable and fun.

Duolingo offers access to lessons for free, but users can subscribe for additional features. The growth in subscriptions is another indicator that people are getting a lot of value out of the lessons. Paid subscribers grew 37% year over year last quarter to nearly 11 million.

The key to unlocking massive growth potential is how Duolingo is using AI to improve its content. Its impressive growth in recent years can be attributed to constant adjusting and monitoring of how users are engaging with the app on a weekly basis. The company has valuable data that allows it to serve the needs of a diverse user base. One of its latest improvements was launching Video Call with Lily, a feature that allows users to practice speaking a language with a virtual assistant.

Over the long term, Duolingo has an opportunity to use AI to make education more personalized across many subjects. This could drive significant growth for the business. It has already been expanding its course offerings, but there's obviously a lot more it can offer beyond language, music, math, and chess to further compound DAUs and revenue.

The company is already very profitable, generating $117 million in net profit on $885 million of trailing-12-month revenue. Investors are betting on lots of growth, with the stock's price-to-sales multiple at 18, putting its market cap at $15 billion. Duolingo can grow for many years just based on the opportunity in languages, where the online language learning market alone is worth $203 billion, according to Statista. The integration of AI with an expanding set of courses could grow its annual revenue well into the billions to support a $100 billion market cap in the next decade.

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John Ballard has positions in Duolingo. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy.