Can these artificial intelligence (AI) stocks maintain their meteoric growth trajectory?

The U.S. stock market as a whole has seen remarkable development since artificial intelligence (AI) emerged as a turning point in early 2023. S&P500 has climbed more than 50% in the past two years. Yet some of the AI’s actions made these gains seem like child’s play.

Since the beginning of 2023, the social media giant Metaplatforms (META 3.85%) soared more than 400%, a stunning return for such a large company. AI SoundHound (HER 8.60%)an emerging player in audio AI technology, surpassed it with returns of nearly 700%. Surprisingly, a software company Palantir Technologies (PLTR 3.38%) surpassed them all, galloping over 900% in just 24 months.

These meteoric growth trajectories are not typical of the stock market. So, do they have extraordinary fundamentals to justify their returns? Or, more importantly, can they continue? The response is mixed.

1. SoundHound AI

Much of what you’ve seen about AI has involved text prompts, but conversational AI, the ability to talk to it (and have it respond), is fundamental to how AI can have an impact on daily life. SoundHound AI specializes in audio and conversation-based AI technology. It’s more complex because it involves the intelligence needed to think and generate responses, as well as the intelligence needed to understand and translate an audio prompt into machine data.

SoundHound AI started in the automotive industry. You may be used to giving commands to your vehicle while you are driving. The company has since expanded into the restaurant industry, powering conversational AI for drive-thru and ordering. However, the potential for expansion is enormous, including almost all applications involving human agents. Think call centers, retail, and customer service across many industries.

The company’s revenue increased 89% year over year in the third quarter and management raised its guidance for the fourth quarter. Unfortunately, this growth is on a small scale; Third-quarter revenue was just $25.2 million. Meanwhile, the stock has an enterprise value of $5.1 billion, compared to estimated revenues of $164 million for 2025. That’s a ratio of 31, making SoundHound very expensive today. It could be difficult for the stock to continue at its current pace, so potential shareholders should wait for a pullback before buying.

2. Palantir Technologies

AI software will impact almost every industry in the future, so there is a big opportunity ahead of Palantir Technologies. The company’s AIP platform for developing and deploying AI applications has lit a flash in the pan at the company. Revenue growth has been accelerating for several quarters and the company still has only 629 commercial customers. There are hundreds of thousands of large companies worldwide (potential customers), so Palantir’s long-term ceiling is extremely high.

Unlike many speculative AI stocks, Palantir is already very profitable. The company converts 37% of its revenue into free cash flow, adding to a $4.5 billion balance sheet and zero debt. Additionally, the company is comfortably profitable under generally accepted accounting principles (GAAP). Palantir’s rise should surprise no one; it is a highly profitable and fast-growing AI innovator.

Palantir’s only problem is that its shares have gotten too far ahead of the company. The stock price rose more than 900%, but the company did not. Today, Palantir trades at a PEG ratio of 5. That’s a great deal, but I don’t like paying above PEG ratios of 2 to 2.5, even for the best stocks. Investors probably shouldn’t expect the stock to continue growing like it has until the valuation cools down a bit.

3. Metaplatforms

Social media giant Meta Platforms is (by far) the largest company on this list, with a market cap of $1.5 trillion. Yet the company has the finances to support it. Meta generates over $156 billion in annual revenue and over $50 billion in cash flow. Its core business is digital advertising, which monetizes the billions of people who use Facebook, Instagram, WhatsApp and Threads.

Meta is deeply involved in AI technology, including massive investments in data centers, an open source AI model (Llama), and an entire business unit dedicated to AI and metaverse products and services ( Reality Labs). Meta has already developed AI tools to help advertisers get the most out of their ad spend, increasing Meta’s pricing power and driving growth in its core business.

The stock’s PEG ratio today is just 1.3, so Meta’s valuation could rise further before becoming a concern. Meanwhile, analysts estimate that Meta will grow earnings by 18% annually over the long term. Investors may not see another 400% over the next two years, but 40-50% seems possible. This could keep Meta on its trajectory of market superiority for some time to come.

Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool features and recommends Palantir meta-platforms and technologies. The Motley Fool has a disclosure policy.