Investing Insight: Is SoundHound AI the Smart Play for Your $500?
With the surge in artificial intelligence interest, selecting the right growth stock requires careful consideration.
One compelling option for investors right now is voice assistant company SoundHound AI (NASDAQ: SOUN). Here’s an overview of the company’s performance and prospects.
Understanding SoundHound AI
SoundHound AI has been pioneers in voice recognition software for over two decades, well before AI became a buzzword. Their technology enhances customer engagement across various industries, from restaurants and automotive solutions to smart devices and call centers.
Image source: Getty Images.
Restaurants can utilize SoundHound’s AI to take reservations or facilitate orders through phone and drive-thru services. Car owners benefit from hands-free interaction with their in-car systems. Notably, major companies such as Qualcomm, Chipotle Mexican Grill, and brands under Stellantis are already leveraging their speech recognition technology.
Further demonstrating its relevance beyond current trends, Nvidia invested in SoundHound earlier this year and integrates its voice assistant in the Nvidia Drive drive-assistance system.
In a strategic move to broaden its market reach, the company recently acquired Amelia for $80 million, expanding into sectors including insurance, finance, healthcare, and retail.
Evaluating SoundHound AI’s Growth Potential and Risks
Over the past year, SoundHound AI’s stock surged by 196%, reflecting growing investor confidence. Their second-quarter results ending August 8 also demonstrated strong sales growth, which jumped 54% to $13.5 million. This momentum, combined with the Amelia acquisition, has led management to forecast full-year sales at $80 million, projecting a 74% increase from 2023.
Leadership anticipates sales will grow to $150 million by the end of 2025—more than tripling their 2023 revenue. They attribute this growth to increasing enterprise spending, with estimates from McKinsey indicating that generative AI spending may reach between $175 billion and $250 billion by 2027.
However, there are risks involved with investing in SoundHound AI. The tech industry is highly competitive, with several other AI firms vying for market share. More critically, SoundHound is not yet profitable.
In their second quarter, the company reported a GAAP net loss of $37.3 million, higher than the $27.3 million loss from the same quarter the previous year. Investors should monitor the company’s progress toward reducing losses, as some analysts predict the loss per share could narrow to $0.34 in 2024 and further to $0.20 in 2025.
Why Consider Buying SoundHound AI Now
Investing $500 in SoundHound AI might be wise given the proven demand for its technology among large enterprises. Their recent acquisition of Amelia is expected to enhance revenue and open new industry doors.
With established companies like Stellantis, Nvidia, and Qualcomm already integrating this technology, SoundHound AI is poised to benefit. The current price-to-sales ratio stands at 26, indicating the stock is not cheap. Investors should prepare for potential stock volatility, but entering at this time might prove advantageous as voice assistant technology becomes more prevalent.
Is Investing $1,000 in SoundHound AI a Wise Decision?
Before committing to SoundHound AI, consider this:
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Chris Neiger has no positional interest in the mentioned stocks. The Motley Fool holds positions in and recommends Chipotle Mexican Grill, Nvidia, and Qualcomm, and recommends Stellantis.
The views expressed in this article reflect those of the author and do not necessarily represent those of Nasdaq, Inc.
