SoundHound AI: Beating Big Tech?

SoundHound AI: Potential to Outperform "Magnificent Seven"

SoundHound AI is experiencing rapid expansion. The management team anticipates achieving organic growth of 50% or more in the near future. Anticipation of significant growth in the coming years has already driven up the stock price.

While opportunities remain within the artificial intelligence infrastructure sector, SoundHound AI (NASDAQ: SOUN) emerges as a compelling investment prospect alongside the "Magnificent Seven". Although smaller, SoundHound AI possesses the agility for rapid growth if product demand exists. Given the widespread adoption of AI across various sectors, SoundHound AI presents an appealing stock choice with the potential to surpass the "Magnificent Seven" in performance over the next five years.

SoundHound AI's Audio Recognition Technology

SoundHound AI delivers on its name by integrating AI technology with audio. Its audio recognition technology is considered among the best, accompanied by AI voices that resemble humans rather than sounding like typical computer-generated voices.
While the concept isn't new, as demonstrated by Apple's Siri and Amazon's Alexa, those platforms have historically struggled with accurately interpreting user requests. SoundHound AI's offerings avoid these issues and often outperform human capabilities. Opportunities abound in sectors where human-to-AI interaction can supplant human-to-human engagement, including drive-thrus, financial institutions, and healthcare billing. SoundHound AI's product has seen broad implementation in these areas, which is fueling substantial expansion for the firm.

Financial Highlights and Growth Projections

SoundHound AI's Q2 revenue reached a record $42.7 million, marking a 217% increase year-over-year. Noteworthy announcements during the quarter included the addition of seven of the world's top 10 financial institutions as clients, along with renewals or upsells with four of these clients. SoundHound AI's stock has considerable momentum, and company leaders express optimism regarding its adoption. CFO Nitesh Sharan projects organic growth of 50% or higher in the foreseeable future. Given SoundHound AI's previous acquisitions to strengthen its portfolio, this expectation is encouraging to investors. Organic growth is derived from existing businesses, so the potential to produce 50% growth or more is significant.
Nvidia is the only "Magnificent Seven" stock that approaches that level of long-term growth; however, its growth rate has gradually declined over the last several quarters. SoundHound AI appears well-positioned to outperform this well-known group of stocks over an extended period, but valuation is a concern. With a price-to-sales ratio exceeding 50, SoundHound AI's stock isn't inexpensive.

This suggests that the stock price may already reflect a year or two of anticipated growth. However, the current price will seem like a bargain if SoundHound AI can sustain an organic growth rate of 50% or more over the next five years. SoundHound AI has substantial potential if its technology continues to gain widespread acceptance. However, there is always a chance that a larger company could release a competing product that disrupts SoundHound AI. If investors recognize the risk, SoundHound AI could be a good investment if you size your portfolio correctly. The future will determine whether SoundHound AI beats the "Magnificent Seven", but I believe the potential is there.