AI SoundHound (NASDAQ:SON) the stock has performed very well recently. Over the past six months, shares have nearly doubled. There are many good reasons for this, and it’s not hard to envision huge gains in the months and years to come.
If you want to bet on the lucrative rise of artificial intelligence (AI), this stock is for you.
AI voice technology is an exciting place to be
SoundHound’s specialty is AI voice technology. According to the company, it has “best-in-class” software that beats the competition in terms of speed, accuracy and understanding of complex language. But what exactly is AI voice technology used for? Many things.
From 2017 to 2021, SoundHound signed dozens of major clients, including Honda, QualcommPandora, InstantVizio and Hyundai. All of these companies wanted to enrich their products and services with AI technology that would allow users to interact using their voice.
Imagine being able to chat with your car about potential maintenance issues, or simply discover new music on your morning commute. It’s not hard to see how any product could benefit from allowing its customers to interact more deeply through AI voice integration.
In recent years, the company has signed numerous restaurant clients, including Five Guys, Krispy Kreme, Chipotle, Applebee’s, Jersey Mike’s and White Castle. Most of these customers want to know how AI voice technology can handle online and drive-thru orders.
According to estimates from Polaris Data Insights, the voice artificial intelligence market is still small, with revenues of around $2.5 billion. But this market is expected to grow about 26% annually over the next decade, surpassing $15 billion by 2032.
And if we’ve learned anything about breakthrough technologies, it’s that total market growth often far exceeds initial estimates, even if it takes longer than expected to begin the growth trajectory.
SoundHound therefore has excellent technology, with a suite of patent protections and a growing list of customers in a potentially massive growth market. But does the share price already reflect all this potential? Or is there a major profit opportunity for early investors?
Is the stock price correct?
Earlier this year, the stock quadrupled in value in a matter of weeks. The apparent reason was a $3.7 million investment from the chipmaker. Nvidia, which was leaked in February. Before the investment was made public, the company was trading at a market cap of $500 million. A month later, it peaked with a market capitalization of $2.5 billion.
Since those highs, its valuation has returned to around $1.3 billion. Is this a second chance to acquire a rising AI superstar?
Currently, its shares are trading at a lofty 19.5 times trailing earnings. It’s expensive, but it makes sense given that the company is growing sales by about 50% per year. And because of the growing interest in AI voice technology, this growth could be just the beginning.
Over the past 12 months, revenues totaled approximately $50 million. With over 270 patents and an early lead with potential customers – which maintains business relationships while allowing SoundHound to continue its education and prove its models through real-world applications – it is reasonable to expect that the company takes a significant share of future market growth. .
It’s also not difficult to imagine the company being acquired. AppleOpenAI’s recent partnership with OpenAI clearly indicates growing interest among big tech companies. In 2022, meanwhile, Microsoft acquired AI voice technology company Nuance for nearly $20 billion, or 15 times SoundHound’s current valuation.
No one knows exactly how big the AI voice technology market will be or how fast its growth trajectory will be. But SoundHound has plenty of elements in place to take advantage of it. And relative to the size the market can reach and the value of recent industrial acquisitions, the company’s valuation of $1.3 billion is acceptable. Aggressive investors looking to bet on a stock with high upside potential should consider adding the company to their portfolio.
Should you invest $1,000 in SoundHound AI right now?
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Microsoft, Nvidia, and Qualcomm. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Is SoundHound AI Stock a Buy? was originally published by The Motley Fool
