After the initial excitement of Nvidia’s (NASDAQ:NVDA) investment in SoundHound AI (NASDAQ:SOUN) stock settled, the stock jumped from $2 to over $10, leading to a reevaluation of its value and potential growth. Questions remain about the investment viability of SoundHound AI, given its history as a public company since 2005.
For investors who are looking for long-term investments, SOUN stock may be worth the risk. With a $1.6 billion market cap, this voice AI company certainly has growth potential. Concerns about the company’s sustainability exist despite its 145% surge. SoundHound’s trajectory in the AI sector will become clearer in the next five years.
SOU Stock and the Surge
Established in 2005, SoundHound AI specializes in voice, sound, and language-recognition software. The company offers solutions for sectors such as restaurant drive-throughs and call centers. Its technology aligns with platforms like OpenAI’s ChatGPT, driving interest as businesses automate operations. Fourth-quarter results showed an 80% revenue increase, driven by partnerships with automakers, smart TV manufacturers, and restaurants like White Castle and Krispy Kreme.
SoundHound AI gained attention as an AI stock because of its affordability at approximately $5 per share and Nvidia’s investment.
With a market cap of $1.6 billion, the company isn’t short on potential upside, if multiple expansion continues from here. Investors ponder whether SoundHound could replicate Nvidia’s success despite their distinct product offerings.
Empowering Voice AI
SoundHound AI stands out as an early player in AI, predating the widespread adoption sparked by OpenAI’s ChatGPT. Renowned for its music identification app, SoundHound’s unique voice AI technology swiftly interprets speech into meaning in real time.
Unlike conventional speech recognition, which involves multiple steps, SoundHound excels with its “deep meaning understanding,” which the company says allows it to grasp complex conversations effortlessly.
Powered by collective AI, SoundHound’s platform learns from user interactions, setting it apart from linear learning models.
SoundHound’s growth potential is bolstered by its ties to Nvidia, particularly in AI voice services for car applications.
Nvidia’s significant investment in SoundHound and collaboration on innovative applications underscore this partnership’s significance.
Additionally, SoundHound’s acquisition of SYNQ3 positions it to lead the AI voice restaurant sector with 10,000 partnerships and a pipeline of 100,000 restaurants.
Be Careful with SOUN Stock
I can certainly see the bull case for why investors would want to take a shot at SOUN stock, given its growth potential within the AI sector.
However, analyzing the less-glamorous factors like its balance sheet, there is plenty left to be desired. The company has minimal cash reserves of around $95 million, and continues to face pressure from ongoing losses.
Until there’s a viable path toward consistent and growing profitability, I’m going to be out, and I think most value-conscious investors will feel the same way.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.