First things first, how does conversational AI differ from generative AI? It’s conversational and used to facilitate human-like discussions between humans and machines. Generative AI, on the other hand, is leveraged for the creation of content. Still, they are effectively AI stocks in practice.
As you might imagine, conversational AI applies to businesses that engage in customer service and marketing. Anything in which a human engages in conversation with another human.
As you can also imagine, conversational AI offers great appeal to businesses: The cost reductions are the most apparent benefit. It’s generally cheaper to buy software than it is to hire employees. Further, conversational AI can potentially be trained faster, eliminating errors quicker than in its human counterpart. Thus, investors are highly interested in conversational AI stocks.
LivePerson (LPSN)
There’s a reasonable chance you’ve interacted with LivePerson (NASDAQ:LPSN) at some point. The firm’s technology has powered more than a billion conversations and AI-based messaging sessions. That experience, along with a strong price upside, makes LPSN stock worth a look. Its shares have the potential to double and perhaps triple an investor’s capital.
LivePerson has over 18,000 customers based on information listed on its website. One of the most compelling reasons to consider investing in LPSN stock lies not in its growth, but rather its operations.
Revenues fell by 26.4% in Q2, above midpoint expectations, and totaled $97.5 million. The company isn’t currently in growth mode, but it wasn’t projected to be based on those revenues bested expectations. It’s all about streamlined operations at the moment. That’s pretty much true for most companies. High-interest rates rule the day.
It’s positive then that LivePerson was able to post a net income of $10.8 million in the second quarter. A year earlier, the firm lost $75.4 million. It spent more to capture greater sales, losing a lot of money. That’s no guarantee the firm will be more cautious moving forward, but it does prove that it at least knows how, and that suggests the long-term viability of the firm overall.
SoundHound (SOUN)
SoundHound (NASDAQ:SOUN) is arguably the best conversational AI stock overall. Its proprietary technology is regarded as being among the best in the world. The company has long innovated and developed the first voice-activated music app.
It’s an attractive potential investment because SoundHound is universally recommended by the analysts that cover the stock. Their price targets suggest that an investor can double or triple their capital through SOUN shares.
On a fundamental basis, SoundHound is a classic growth story. Revenues increased by 42% in the most recent quarter, reaching $8.8 million. Net losses are large, at $21.9 million, but narrowed by 28%.
The company doesn’t appear to be in trouble, with $130 million in cash. Further, SoundHound is investing in generative AI to create a multimodal foundational model for the firm. The company combines generative AI and conversational AI, so it has differentiation.
Microsoft (MSFT)
It’s no secret that Microsoft (NASDAQ:MSFT) is among the leading AI stocks overall. Its investment in OpenAI and ChatGPT has cemented its position as a first mover in the sector. It’s also no secret that Microsoft, a leading tech giant, has its fingers in everything. That’s the benefit of having vast resources at your fingertips. Thus, it should surprise no one that MSFT shares offer investors exposure to conversational AI opportunities.
I won’t talk much about Microsoft’s recent performance other than to say that it continues to impress.
Generally, when discussing conversational AI and Microsoft, we discuss Azure bots and cognitive services. Those services include natural language processing, dialog management, and other applications that can be leveraged to create human-like conversations.
It’s difficult to say whether Microsoft’s development of conversational AI applications will be better than those from Alphabet (NASDAQ:GOOG, GOOGL) or any other tech titan. Still, given how well Microsoft is doing overall, I’d choose it before the others.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
