Momentum Focus: RGTI, SOUN, CVNA

What is a Momentum Stock?

Momentum stocks are stocks that are trending upward at a much more rapid pace than the market. Unlike the rest of the market, speculative momentum stocks are driven by hopes about the future, innovation, psychology, animal spirits, market momentum, and strong industry groups. While many legacy investors shy away from these stocks, retail traders with a short-to-intermediate time frame and the benefit of flexibility can profit from these stocks through chart reading and risk management. Today, we will discuss three momentum stocks in hot industry groups that are breaking out.

Rigetti: A Quantum Computing Leader

While quantum computing has yet to generate substantial profits, many forward-looking investors are eager to get in on the ground floor. Zacks Rank #3 (Hold) stock Rigetti Computing (RGTI) is “on a mission to build the world’s most powerful quantum computers to help solve some of the most important and pressing problems in the world.” While the company has just over $1 million in revenue, that number is expected to explode to $37.65 million next year (according to Zacks Consensus Estimates).

Meanwhile, RGTI has recently landed several government contracts, including one with the Defense Advanced Research Projects Agency (DARPA). RGTI is currently breaking out of a long base structure after correcting to the 200-day moving average.

Finally, Rigetti is a member of the QC industry group, which includes strong performers like Quantum Computing (QUBT) and D-Wave Quantum (QBTS).

SoundHoundAI: A Momentum Opportunity in the AI Realm

Unfortunately, most of the AI leaders on Wall Street are slower-moving mega-cap tech stocks like Microsoft (MSFT). While these stocks have performed well, they do not offer super-performance. That said, SoundHoundAI (SOUN), a global leader in AI voice solutions, is an exception. SOUN, which has a similar pattern as RGTI, enjoys a multi-faceted partnership with AI leader Nvidia (NVDA).

Carvana: A Turnaround Story

In late 2022, e-commerce car company Carvana (CVNA) was on the brink of bankruptcy, with its share price in the single digits. However, the company was able to secure financing and turn the fundamental picture 180 degrees.

Since then, the CVNA shares have soared from single digits to over $300 a share today. The stock is again breaking out on its price chart and earns a robust Zacks Rank #2 (Buy) rating.

Bottom Line

Momentum stocks offer nimble traders opportunities for super performance. Quantum computing and AI stocks provide traders the best opportunities in the current market environment.

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This article originally published on Zacks Investment Research (zacks.com).

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