Nvidia (NASDAQ:NVDA) is one of the world’s largest companies. As of this writing, the company has a market capitalization of $3.3 trillion, of which $3 trillion has been added in value in the last two years alone.
Nvidia’s data center graphics processing units (GPUs) are the gold standard for artificial intelligence (AI) model development and a key driver behind the company’s tremendous growth. Over the past year, CEO Jensen Huang has spread some of Nvidia’s fortunes by investing in other AI stocks.
Start your morning smarter! Wake up with breakfast news delivered to your inbox every market day. Sign up for free »
Image source: Nvidia.
Nvidia started investing in AI stocks at the end of 2023. According to its latest 13-F filing with the Securities and Exchange Commission, released a few weeks ago, the company currently owns six stocks:
Applied Digital Corp builds data centers for customers.
Arm Holdings helps semiconductor companies design advanced computing chips.
Nano-X Imaging develops AI software that improves the efficiency of medical imaging.
Recursion Pharmaceuticals is using AI to transform its drug discovery process.
Serv Robotics, which develops autonomous delivery robots.
Soundhound AI (NASDAQ: SOUN)is a leader in conversational AI technology.
Arm Holdings received the largest investment, with Nvidia’s position worth $280 million as of the end of the third quarter of 2024 (ending September 30). That’s more than half the value of Nvidia’s entire portfolio.
Arm stock is up about 77% since Nvidia acquired it, but it’s still behind the 271% return generated by SoundHound AI. NVIDIA’s position in SoundHound is relatively small, worth just $13.6 million based on the current stock price of $7.88, but that’s clearly not stopping investors from rushing to buy.
So is it too late to follow Nvidia’s lead?
While most popular generative AI chatbot applications perform best when users type text-based prompts, SoundHound is a leader in conversational AI that can understand and respond to voice prompts as well.
SoundHound’s software is primarily used in the automotive, hospitality, and quick-service restaurant industries. However, the company acquired Amelia, another company specializing in conversational AI, a few months ago. It will help organizations create AI-powered virtual agents to serve customers and employees, and the deal will help SoundHound expand into other industries such as financial services, insurance, and healthcare. Masu.
story continues
Automotive giants like Mercedes-Benz and Stellantis (home of Jeep, Dodge, and Chrysler) are the top two customers of SoundHound software. The company’s Chat AI product allows these brands to equip their vehicles with AI voice assistants, allowing drivers to instantly request information about the weather, the stock market, and even flight status en route to the airport.
SoundHound’s Vehicle Intelligence software also knows everything about a car’s features and functions and can request them at any time, allowing drivers to say goodbye to physical instruction manuals.
In the restaurant industry, popular chains like Chipotle, Krispy Kreme, and Papa John’s use SoundHound’s software. The company offers an AI ordering system that can accept phone orders, in-store orders, and even drive-thru orders without human intervention. We’ve also developed a product called Employee Assist that employees can call anytime if they need information about store policies or menu items.
SoundHound generated record revenue of $25.1 million in the third quarter of 2024. This was a staggering 89% increase over the same period last year. For the first time, SoundHound included a portion of Amelia’s revenue, which helped fuel its growth.
The acquisition added benefits such as customer diversification. While 90% of SoundHound’s revenue in the third quarter of last year came from the automotive industry, six different industries now account for 5% to 25% of total revenue. This is one of the main reasons why SoundHound has significantly raised its outlook for 2024 and 2025.
The company expects revenue to be between $82 million and $85 million this year (previously forecast was $80 million), an 82% increase compared to the midpoint of the range in 2023.
The company expects 2025 revenue to be between $155 million and $175 million (previously forecast was $150 million), with growth accelerating 97% at the midpoint of the range. is shown.
But it gets better. SoundHound told investors it has a backlog of more than $1 billion, which it expects to turn into revenue over the next six years.
SoundHound is losing a significant amount of money. In the third quarter, it burned through $21.7 million on a generally accepted accounting principles (GAAP) basis (remember, revenue was just $25.1 million). With just $136 million in cash on hand, the company can’t afford to lose money at this rate for long.
In fact, SoundHound recently announced a new market share plan that will allow it to raise an additional $120 million through the issuance of additional shares. While this helps secure the company’s future, it also dilutes existing shareholders and could be a loss for investors who buy shares now.
Based on SoundHound’s past 12 months of revenue and current market cap of $3.2 billion, the company’s stock trades at a price-to-sales (P/S) ratio of 37.5. That makes it even more expensive than Nvidia. This doesn’t make much sense, considering Nvidia has a decades-long track record of success, as well as a fortress balance sheet, booming financial results, and the world’s best AI chips.
SOUN PS ratio data by YCharts
SoundHound’s 2025 earnings forecast makes the stock look much cheaper on a forward-looking basis. However, investing in the AI industry is still a highly speculative method, so it’s important to only invest money you can afford to lose.
After all, Nvidia is a $3.3 trillion company, so it’s probably not worried about losing the $13.6 million it currently has invested in SoundHound stock if things go wrong.
Have you ever felt like you missed out on buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our team of expert analysts will issue a “Double Down” stock recommendation on a company we think is about to crash. If you’re already worried that you’re missing out on an investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves.
NVIDIA:If you invested $1,000 when it doubled in 2009;That’s $358,460!*
Apple: If you invested $1,000 when it doubled in 2008, you’d get $44,946!*
Netflix: If you invested $1,000 when it doubled in 2004, you would have earned $478,249. *
We currently have “double down” alerts on three great companies, and we may not see an opportunity like this again anytime soon.
See 3 “Double Down” stocks »
*Stock Advisor returns as of December 2, 2024
Anthony Di Pigio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Nvidia, and Serve Robotics. The Motley Fool recommends Stellantis and recommends the following options: December 2024 Short $54 on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Nvidia bought six artificial intelligence (AI) stocks, but this one was the one that rose the most.
