Is SoundHound AI Stock a Buy?
SoundHound AI (NASDAQ: SOUN) stock has done very well recently. Over the past six months, shares nearly doubled. There are many great reasons for this, and it's not hard to see tremendous upside 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 speed, accuracy, and complex language understanding. But what exactly is AI voice technology good for? A lot of things.
From 2017 to 2021, SoundHound signed dozens of major clients including Honda, Qualcomm, Pandora, Snap, Vizio, and Hyundai. All of these companies wanted to augment 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 to discover new music on your morning commute. It's not hard to see how pretty much any product could benefit from their customers being able to more deeply interact through AI voice integration.
In recent years, the company has signed a slew of restaurant customers including Five Guys, Krispy Kreme, Chipotle, Applebee's, Jersey Mike's, and White Castle. Most of these customers are interested in how AI voice technology can handle online and drive-thru orders.
According to estimates from Polaris Data Insights, the AI voice market is still small, with a revenue value of around $2.5 billion. But that base is expected to grow by around 26% annually over the next decade, surpassing $15 billion by 2032.
And if we've learned anything about revolutionary technologies, it's that the total market growth often vastly exceeds initial estimates, even if it does take longer than expected to get the growth trajectory initiated.
So SoundHound owns some great technology, with a suite of protective patents and a growing customer list in a potentially massive growth market. But does the stock price already reflect all of this potential? Or is there a major profit opportunity for early investors?
Is the stock priced correctly?
Earlier this year, the stock quadrupled in value in a matter of weeks. The apparent reason was a $3.7 million investment by chipmaker Nvidia, which was disclosed in February. Before the investment was made public, the company traded at a $500 million market cap. A month later, it peaked with a $2.5 billion market cap.
SOUN market cap; data by YCharts.
Since those peaks, its valuation has shrunk back to around $1.3 billion. Is this a second chance to buy into a rising AI superstar?
Right now, its shares trade at a lofty 19.5 times revenue. That's pricey, but it makes sense considering the company is growing sales by around 50% per year. And due to rising interest in AI voice technology, this growth could just be the beginning.
Over the last 12 months, revenue totaled around $50 million. With more than 270 patents and an early lead with potential customers -- which cultivates business relationships while allowing SoundHound to further train and prove its models through real-world applications -- it's reasonable to expect the company to take a sizable chunk of future market growth.
It's also not difficult to see the company being acquired. Apple's recent partnership with OpenAI clearly indicates rising interest among major tech companies. In 2022, meanwhile, Microsoft acquired AI voice technology company Nuance for nearly $20 billion -- 15 times SoundHound's current valuation.
No one knows exactly how large the AI voice technology market will become, or how quick the growth trajectory will be. But SoundHound has many of the pieces in place to take advantage. And relative to how large the market can become, plus the value of recent industry acquisitions, the company's $1.3 billion valuation is palatable. Aggressive investors willing to place a 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.
