Picking the best-performing artificial intelligence (AI) stocks one year from now isn’t easy. In 2023, it finally became Nvidia. In 2024, all signs are pointing towards Palantir Technologies. The transition from AI hardware to AI application software was predictable. In order to recoup all your hardware investments, it will have to be deployed and useful at some point.
As a result, I think another AI software company will rise to the top in 2025. My guess is that it will be SoundHound AI. (NASDAQ: SOUN)despite already having an incredibly strong 2024, up over 300%. So how can a company whose stock price has already risen this much become a top contender in 2025?
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SoundHound AI’s platform focuses on taking audio input and converting it into prompts for the AI platform. This has a variety of applications, including auto manufacturing, restaurants, financial services, insurance, and healthcare. The company already has products for these industries, with automakers and restaurants being some of its biggest customers.
Still, the company is quite diversified in 2024. In the third quarter of last year, 72% of its revenue came from a single customer and 90% of its total revenue came from its automotive division. Currently, our largest client contributes only 12% of our revenue, and our largest sector accounts for 25% of our revenue.
This diversification is an important part of SoundHound’s transformation into a more stable company with greater relevance across all industries. If that one customer had left the company at the end of 2023, the business could have collapsed. Even if its biggest customers left now, the damage would still be there, but not as much as before.
SoundHound still comes with risks, but this goes a long way in reducing risk levels.
Revenues for the third quarter were $25.1 million, an increase of 89% year-over-year. Revenues over the past 12 months totaled $67 million, making the company a small-cap stock. For other, more established software companies, that would be a much smaller portion of overall revenue, but the company isn’t expected to stay there for long.
Management expects 2025 revenue to be between $155 million and $175 million. This is nearly double the 2024 revenue forecast. It’s clear that SoundHound expects its business to remain strong in 2025.
This also highlights an important point in investing. In other words, if the company’s product becomes the industry standard for speech recognition, what are the limits? Think of all the ways we use voice to control our behavior. Now imagine that coupled with the power of AI. SoundHound could be a big winner in this space even after all this growth.
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