Is Under $20 SoundHound AI Stock the Next NVIDIA, and a Buy?

NVIDIA Corporation NVDA has been around for decades. However, with the advent of artificial intelligence (AI), the company has witnessed explosive business growth. In the past year, NVDA stock has surged 149%, becoming one of the top S&P 500 performers of 2024.

But it’s just not NVIDIA, SoundHound AI, Inc. SOUN has also been one of the market darlings, which saw its shares jump a whopping 663% over the past year. Does this mean the company that provides voice AI platforms is now the next big thing in the AI space, and worth a buy? Let’s see –

Cooler-than-expected price pressures recently boosted SoundHound AI stock. According to the Bureau of Labor Statistics, the consumer price index increased 0.2% from the prior month in December, a deceleration from November’s month-over-month gain of 0.3%. Similarly, wholesale inflation unexpectedly eased last month due to decreased food and service costs. Waning inflation lessens the chance of interest rate hikes, benefiting SoundHound AI’s future cash flows.

SoundHound AI’s products, anyhow, are widely accepted among several industries. SoundHound AI’s audio inputs are popular in generative AI models for drive-through ordering at quick-service restaurants like Chipotle Mexican Grill, Inc. CMG. Electric vehicle manufacturers and several auto brands are utilizing SoundHound AI’s voice AI. Lest we forget, SoundHound AI’s proprietary Polaris AI model has been adopted across various industries for its superior performance at a lower cost.

This widespread adoption of SoundHound AI’s voice-enabled AI systems has led to an impressive 89% revenue growth in the third quarter. Management has also increased revenue guidance to almost $85 million for 2024 and nearly $175 million for 2025. In the prior quarter, the revenue guidance was $80 million for 2024 and $150 million for the current year.

Despite SoundHound AI’s strong revenue growth and guidance, and favorable macro trends, its lofty valuations, trading at 35 times sales, raise concerns. Resource constraints, recent operating losses from heavy investments, and reliance solely on equity financing cast doubts on its sustainable growth.

SoundHound AI is also facing stiff competition from major players like Alphabet Inc. GOOGL. The conversational AI platform of GOOGL was recently selected by Mercedes-Benz for its CLA cars and various other vehicles. Alphabet’s move in this space may have an impact on SoundHound AI’s gains in the future.

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