The launch of OpenAI’s ChatGPT in late 2022 has generated significant excitement within the generative artificial intelligence (AI) industry. While hardware companies have profited from selling chips needed to run and train these complex algorithms, the consumer-facing software side of the industry has seen fewer successes.
SoundHound AI is positioned to change this landscape with its industry-leading AI voice and speech recognition software, which is already being used in real-world applications. Founded in 2005 and going public through a special purpose acquisition company merger in 2022, SoundHound AI has developed audio technology products, including in-car music and speech recognition software.
Despite achieving a 73% year-over-year revenue growth in the first quarter of 2024, SoundHound AI is currently operating at a loss. The company’s hefty investment in research and development, exceeding its quarterly revenue, may delay profitability in the short term but could pave the way for future success.
Looking ahead, SoundHound AI’s software shows promise for real-world applications, particularly in industries like fast-food where voice recognition technology could replace human workers. The company has already formed partnerships with major players in the food industry, indicating a strong growth trajectory over the next five years.
However, competition in the AI software space poses a challenge for SoundHound AI. While the company may have an early lead in voice-based AI technology, maintaining a competitive edge against industry rivals could impact its growth potential and margins. Collaborations and investments from companies like Nvidia demonstrate confidence in SoundHound AI’s future prospects.
With a price-to-sales multiple of approximately 24, SoundHound’s stock may seem expensive. However, as an innovative software company targeting a disruptive industry, its valuation is comparable to other AI companies like Nvidia. Despite the premium valuation, SoundHound AI stock has the potential to outperform in the coming years.
