As stock prices have skyrocketed since the beginning of this year, Soundhound AI(NASDAQ: SOUN) Shows how stock market investing can make millionaires. A $10,000 investment made at the beginning of 2024 is now worth $97,300. But can this explosive rise continue? Let’s see if there’s still gas left in the tank for this artificial intelligence (AI) software stock.
Since the announcement of OpenAI’s ChatGPT in late 2022, generative AI has been the hottest hype cycle on Wall Street. However, until recently, most of the winning companies operated on the hardware side of the industry. graphics processing unit (GPUs) and other data center equipment for training and running AI algorithms.
In the long term, the industry will likely move toward consumer software to generate the cash flow and profits needed to justify hardware purchases. Companies like SoundHound AI could represent the next stage of the industry’s growth because of its potential for real-world utility.
SoundHound has been developing sound and speech recognition technology since its founding in 2005, initially focusing on music discovery apps. However, management has large language model (LLM) Like ChatGPT. Combining the two technologies will allow humans to interact with machines in many different ways. Really There is potential for companies to replace human labor in a practical way.
SoundHound’s products include restaurant voice assistants designed to automate phone lines for small businesses by taking orders, providing menu information, and other services. The company also offers drive-thru automation services and boasts contracts with notable restaurant customers such as White Castle, Church’s Texas Chicken, and Jersey Mike’s Subs.
SoundHound large gatherings are possible explained By the monetization potential of the software. For most investors, It’s not a big deal to see How AI voice assistants can create value for restaurants and other applications. The market expects interest rates to fall in the coming years. can make Small, unprofitable companies like SoundHound have an easier time raising the capital they need to grow.
Third-quarter revenue rose 89% year-over-year to $25.1 million as SoundHound continued to add customers from restaurants to financial services. The company’s sales mix is also increasingly diverse, with each industry accounting for 5% to 25% of total sales.
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That said, SoundHound is not without its challenges. With operating losses widening relentlessly (up 132% to $33.8 million in the third quarter) and only $135.6 million in cash and equivalents on the balance sheet, management ultimately You may need to rely on funding. stock dilution Raise the capital you need to continue growing your business.
But while SoundHound’s funding situation is tense, its biggest problem may stem from competition. Speech recognition is common — most of us are familiar with examples such as: apple‘s Siri is microsoft Subsidiary Nuance Communications. Competitors could easily integrate existing technology with LLM and erode SoundHound’s moat. Probably Microsoft the biggest Because it’s a threat of partial ownership of OpenAI, Advanced LLM Developer.
SoundHound is an exciting way to bet on the software side of the AI industry, but investors need to put their foot down. carefully. and Price relative to sales (P/S) ratio of 99, most of the company’s growth potential may already be priced in. S&P500 The average P/S ratio is only 2.8.
From 2025 onwards, the market will need to consider SoundHound’s relentless cash burn and weak economic moat. And the stock could potentially give back much of its recent gains. Investors looking to make millions of dollars in the stock market should probably avoid SoundHound stock. for now.
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Will Ebifang has no position in any stocks mentioned. The Motley Fool has positions in and recommends Apple and Microsoft. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Is SoundHound AI a Billionaire Maker Stock? Originally published by The Motley Fool
