SoundHound AI Shines Amidst Industry Giants: What’s Next for Investors?

SoundHound AI (NASDAQ: SOUN) has emerged as a significant player in the current AI market.

Last year, shares of the voice-activated AI company surged by more than 800%. Although the stock has since stabilized, enthusiasm remains strong as investors have turned their attention to this rapidly expanding firm. Initially known for its music recognition app similar to Shazam, SoundHound now provides technology solutions for a range of clients, including automakers and restaurants, allowing them to implement voice-activated systems.

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SoundHound’s growth narrative is solid, with third-quarter revenues increasing 89% to $25.1 million. However, a portion of this growth can be attributed to acquisitions.

Currently, the stock carries a hefty price-to-sales ratio of 63, alongside persistent unprofitability, which could suggest a potential decline this year. Many gains from last year seem primarily driven by enthusiasm regarding its AI prospects.

Two companies appear better positioned for growth compared to SoundHound AI over the coming year.

Image source: Getty Images.

1. GXO Logistics: A Logistics Leader

GXO Logistics (NYSE: GXO) stands as the largest pure-play contract logistics firm globally. Operating nearly 1,000 state-of-the-art warehouses, it supports major brands like Apple and Nike in ensuring timely and efficient product delivery, as well as handling returns seamlessly.

Since its spin-off from XPO in 2021, GXO has reported impressive results. However, its stock recently experienced a downturn after management announced the halt of a potential acquisition.

As of February 11, GXO’s market capitalization is just below that of SoundHound at $5.1 billion. This represents a decline of about one-third from its pre-news share price in December.

Importantly, GXO does not require a buyout to thrive; the company was created with a strategy of growth through acquisitions and has already added Clipper Logistics, Wincanton in the UK, and PFSweb in the U.S. to its portfolio.

Despite the recent acquisition news and a broader industrial economy slowdown, GXO remains on track to meet its 2027 financial goals, which aim for between $8 billion and $12 billion in revenue and $1.6 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Presently, the stock trades at only three times projected EBITDA.

Should GXO maintain its momentum, the stock could potentially double or even triple by 2027, surpassing SoundHound’s valuation.

2. Sweetgreen: A Promising Salad Chain

Sweetgreen (NYSE: SG) is another rapidly growing company that could surpass SoundHound in market capitalization this year.

This fast-casual salad restaurant is expanding quickly, currently valued at around $3 billion. In many respects, it exhibits the key characteristics of a high-potential restaurant stock.

Its average unit volume sits at $2.9 million, comparable to industry frontrunners like Chipotle, alongside a steady growth trajectory with comparable-store sales soaring 6% in the third quarter, lifting revenue by 13%.

A cutting-edge advantage is Sweetgreen’s implementation of a kitchen robot named Infinite Kitchen. This technology reportedly enhances production speed and reduces labor costs, boosting financial results and customer satisfaction at outlets employing it.

While it carries a growth stock valuation, Sweetgreen has significant potential ahead, aided by its fewer than 250 restaurant locations and its leading position in the burgeoning fast-casual salad sector.

The recent decline in Sweetgreen stock presents a potential buying opportunity, especially if it can sustain robust growth and improve profitability.

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Jeremy Bowman holds positions in GXO Logistics, Nike, Sweetgreen, and XPO. The Motley Fool has positions in and recommends Apple and Nike. The Motley Fool endorses GXO Logistics, Sweetgreen, and XPO. The Motley Fool maintains a disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.