/AI%20(artificial%20intelligence)/Businessman%20touching%20the%20brain%20working%20of%20Artificial%20Intelligence%20(AI)%20Automation%20by%20Suttiphong%20Chandaeng%20via%20Shutterstock.jpg)
The rapid advancement of artificial intelligence (AI) has brought transformative changes to numerous industries, placing AI-focused companies in the spotlight. One such company is SoundHound AI (SOUN), a pure-play voice AI technology company. Over the past two years, SOUN stock has surged an impressive 985%, significantly outperforming the S&P 500 Index’s ($SPX) 52% gain. Much of this growth occurred after Nvidia (NVDA), a leading chip giant, expressed interest in the company last year. Nvidia revealed in a 13F filing that it made a $3.7 million investment in SoundHound AI.
But that’s not the only reason behind SOUN stock’s remarkable performance. The company has achieved substantial revenue growth, fueled by the rapid adoption of its voice technology across sectors such as automotive, hospitality, retail, and consumer electronics. Last year alone, the stock skyrocketed 853.8%, far exceeding the broader market’s 24% gain. Wall Street analysts anticipate further growth this year. Let’s dive deeper into the details.
What Does SoundHound AI Do?
Before Nvidia revealed its investment, SoundHound AI was a lesser-known penny stock. Despite the company’s impressive advancements in voice AI technology, it gained significant attention only after Nvidia’s involvement, which also attracted additional investments and partnerships from other companies.
SoundHound AI focuses on voice recognition and conversational AI technology. Its flagship platform, Houndify, enables businesses to integrate voice-enabled AI into their products and services. Unlike traditional voice assistants that rely heavily on cloud connectivity, SoundHound’s technology operates both on-device and in the cloud. This dual capability ensures faster response times and enhanced privacy. The company’s partners and clients include prominent names such as Mercedes-Benz, Hyundai (HYMTF), Oracle (ORCL), Samsung, Nvidia, Qualcomm (QCOM), General Dynamics (GD), and Deloitte, among others.
SoundHound AI: Strengthening Financials
With a market capitalization of $5.1 billion, SoundHound AI has demonstrated impressive revenue growth in recent quarters, driven by the increasing adoption of its voice AI solutions.
In the third quarter, the company reported revenue of $25.1 million, marking an 89% year-over-year increase. This growth was fueled by expanding partnerships with automotive manufacturers, smart device makers, a more diverse customer base, and greater usage of its voice AI services. Gross margin under generally accepted accounting principles (GAAP), reached 49% during the quarter.
Although SoundHound AI is experiencing robust revenue growth, it remains unprofitable — common among early stage tech companies that prioritize significant investments in research and development as well as strategic acquisitions to support expansion. In Q3, the company posted adjusted net losses of $0.04 per share, an improvement from $0.06 per share in the same period last year.
During the quarter, SoundHound also completed the acquisition of Amelia, a prominent enterprise AI software company. SoundHound AI’s cash position remains stable for now, with $136 million in cash and cash equivalents as of the third quarter. However, the company also carries $39 billion in outstanding debt from its recent acquisition. While this provides financial flexibility for ongoing operations, sustained losses could present challenges in the future.
In the Q3 earnings call, management stated, “We continue to scale our automotive, AI agent, and restaurant businesses. We are integrating the acquisitions, and we see significant revenue synergies. And we expect to drive meaningful opportunities for upsell and cross-sell across the full portfolio.”
As a result, the company projects revenue of $155 million to $175 million in 2025 and aims to achieve positive adjusted EBITDA by the end of this year. CEO Keyvan Mohajer emphasized that “voice is the ‘killer app’ for applied generative AI” and believes SoundHound is well-positioned to seize this substantial opportunity. Looking ahead, analysts anticipate SoundHound’s revenue will grow by 82.3% in 2024, followed by 95.7% growth in 2025. Additionally, they forecast losses to narrow from $0.38 per share in 2024 to $0.25 per share in 2025.
What Does Wall Street Say About SOUN Stock?
Overall, Wall Street rates SOUN stock as a “Moderate Buy.” Among the six analysts covering the stock, four give it a “Strong Buy” rating, while two suggest a “Hold.”
The stock has already exceeded its average price target of $13.25. However, the highest target price of $26 implies potential upside of 67% within the next 12 months.
The Bottom Line on SOUN Stock
The global AI market is experiencing rapid growth, with voice AI positioned for substantial expansion as businesses and consumers increasingly adopt voice-enabled technologies for greater convenience and efficiency. SoundHound’s early mover advantage in voice AI solutions gives it an edge in the AI-driven customer service market, positioning it as a potential big thing in the AI space.
However, with SOUN trading at 30 times its projected 2025 sales, its stock appears expensive. Additionally, the company’s lack of profitability and competition from established tech giants present significant challenges. SoundHound’s long-term success will depend on its ability to maintain growth and achieve profitability. As a rising AI stock, investors should carefully evaluate these factors and assess their risk tolerance before considering SOUN stock.
