SoundHound AI, the artificial intelligence (AI) company, saw a significant surge in its stock performance in the first half of 2023. According to data from S&P Global Market Intelligence, SoundHound AI’s stock rose by an impressive 157.1% during this period, reflecting the growing interest in AI solutions among the public. Despite starting the year as a penny stock with limited revenue streams, SoundHound AI leveraged the increasing demand for AI technologies to drive its growth.
At the core of SoundHound AI’s offerings is its AI-based voice-recognition platform, which is available to customers in various forms. The company generates revenue through technology-license royalties, subscription plans for its turnkey voice-control services, and ad-based monetization. While SoundHound AI was initially known for its music-identification tool, similar to Apple’s Shazam app, it has successfully transitioned to serving enterprise clients. Today, SoundHound AI counts leading payment systems, automakers, and software developers among its partners and clients. Thus, if you have ever used voice commands in your car or interacted with a chatbot over the phone, you may have unknowingly encountered SoundHound AI’s technology.
Investors have recognized SoundHound AI’s potential in 2023. The company’s name itself, SoundHound AI, highlights its reliance on proprietary AI systems, sending a clear message to the market. Despite its relatively small size, with sales totaling just $31.1 million last year, SoundHound AI has been experiencing remarkable revenue growth even before the recent AI boom. Over the past four quarters, its trailing revenues increased by a remarkable 71%.
SoundHound AI’s AI-powered hyper-growth story easily appeals to investors. However, it’s crucial to note that the company currently operates with negative operating profits and cash flows, often raising cash through dilutive stock offerings. Additionally, the stock price has not experienced significant growth, especially considering the general trend of investors favoring safer investments in 2022. In fact, SoundHound AI’s stock price is nearly the same as it was 52 weeks ago, barely keeping up with the 16% gain seen in the S&P 500 over the same period.
Therefore, it is advisable to take a more cautious approach when considering SoundHound AI’s long-term prospects before investing. While the company’s ability to secure contracts with market-leading brands is commendable, the value generated from these deals may be limited. It may be prudent to wait for a potential price correction before considering investment opportunities in SoundHound AI.
