Few stocks have been on a run like SoundHound AI (NASDAQ: SOUN) has over the past year. It rose by more than 1,000% at one point during 2024, though it has come down by about 42% from its December peak. Yet with the stock still up by around 560% since 2024 began, many investors may wonder if this artificial intelligence (AI) stock remains a good pick from here.
On the one hand, the adoption of its software seems practically unstoppable, and SoundHound is projected to double its revenue in 2025. On the other, the stock is priced at a steep premium. Is it worth it?
Most AI models available today require a text input to trigger a response. This has been the approach for nearly all generative AI models like ChatGPT or DeepSeek’s R1. However, the need to type in text limits their use cases. There are many situations where having the ability to simply speak to an AI would be far superior, which is why SoundHound AI’s stock has gotten a lot of attention.
Digital assistants that can parse ordinary speech have been around for a long time — think Siri or Bixby on a smartphone, or Alexa on a smart home device. However, those often misunderstand your words or misinterpret what you mean, making them frustrating to use.
SoundHound’s voice comprehension technology can outperform a human being in some cases. For example, when SoundHound’s technology was installed at White Castle’s drive-thrus, it surpassed the benchmarks previously established by employees, getting orders processed faster and more accurately. That’s critical: Nobody wants to interact with an AI platform that’s less accurate than a human.
The potential use cases for this technology are diverse, but SoundHound has already found many applications in the automotive, restaurant, healthcare, financial, and insurance industries. Today, no individual sector provides more than 25% of its total revenue. That’s a huge change from last year, when 90% of revenue came from automotive, and 72% came from a single corporate customer.
Recognition of the rapidly expanding demand for SoundHound’s software is what caused the stock to rocket higher in the last couple of months of 2024.
Because SoundHound AI isn’t profitable, investors can’t use earnings-based metrics to value its stock. That leaves revenue-based metrics — and while its current price-to-sales (P/S) ratio of 64 is far cheaper than the 100 times sales multiple it traded at in late 2024, it’s still incredibly expensive.
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