The first half of the year has been somewhat of a rollercoaster ride for stocks — and investors. Though all three major indexes have now crossed into positive territory, that wasn't the story just a few weeks ago. The S&P 500 index, the Dow Jones Industrial Average, and the Nasdaq Composite each sank in the early months of the year amid concerns that President Donald Trump's import tariff plan would hurt the economy, earnings, and stock performance.
Since then, positive signs, such as initial trade deals and strong earnings reports, have eased investors' minds, and as a result, the indexes rebounded. Still, certain growth stocks, such as some artificial intelligence (AI) players, remain in the doldrums and are heading for a first-half decline. Let's take a look at two that could be poised for a big second-half comeback.
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1. Apple
As Trump announced his tariff plan, investors worried about what it could mean for Apple (AAPL 0.04%), in particular, because the company produces most of its iPhones in China, a country most highly targeted by tariffs. Though the president exempted electronics products, this exemption is temporary. He even threatened Apple recently with a 25% tariff on all imported iPhones.
Apple made a move to diversify its manufacturing base, promising that most U.S.-destined iPhones would soon be made in India, but that country faces tariffs, too. All this tariff uncertainty weighed on Apple stock, pushing it down by about 20% so far this year.
So, why should we expect a comeback in the second half? While Trump is serious about bringing manufacturing back to the U.S., it's unlikely that he and his administration would make moves to destroy some of the country's top companies, including Apple. We've seen signs of flexibility in initial U.S. trade deals with the U.K. and China, so it's reasonable to expect a compromise with tech companies that won't limit their growth.
Meanwhile, Apple is a well-established player with a strong financial situation. The company has more than $48 billion in cash and marketable securities. So, it has the resources to address challenges. At the same time, the smartphone giant has a newish growth engine in the form of services. Services revenue, thanks to Apple's huge base of installed devices, has reached record levels quarter after quarter. This growth should continue as loyal Apple users continue to rely on the company for data storage, digital entertainment, and more.
All this means that today, Apple looks like a bargain, trading at 27 times forward earnings estimates, down from more than 35 times late last year. These levels offer it plenty of room to run, and it may do just that on any good news in the second half.
2. SoundHound AI
SoundHound AI (SOUN -0.91%) is a specialist in voice AI, with its technology powering voice systems in cars and restaurant ordering systems, to mention just two examples. The stock has plummeted 50% so far this year, but I see this as more of a buying opportunity than a reason to worry, and here's why.
First, after a 150% increase in SoundHound shares over the past year, it's not surprising that some investors may have locked in gains in recent times. Second, growth companies — particularly young growth companies — may struggle to expand during rough economic times, so investors' concerns earlier this year led to a sell-off of these sorts of players.
Today, it's important to look at SoundHound's earnings performance and long-term prospects. The company is in high-growth mode, with revenue soaring 150% in the latest quarter as it expands its customer base across various sectors. This is key because use across industries lowers risk, meaning if one customer or industry suffers, SoundHound won't necessarily suffer alongside it.
SoundHound has numerous patents protecting its technology, a system that immediately translates speech into meaning without the speech-to-text step. This results in speed and improved quality.
SoundHound's rapid growth and revenue of $29 million in the quarter, along with the forecasted $140 billion AI voice market size, suggest that much more growth could be ahead for this voice specialist.
All this means that as uncertainty about the general economy lifts and SoundHound continues to deliver growth, the stock could roar higher in the second half of the year.
