Traders might wish to keep watch over this synthetic intelligence voice-and-speech recognition inventory with ties to Nvidia . Shares of SoundHound AI have surged virtually 170% this yr and almost 347% in February alone as traders wager on new purposes for the booming expertise pattern that is taken Wall Road by storm. Final month, Nvidia revealed a $3.7 million wager on the inventory in a securities submitting, and administration mentioned on an earnings name that “demand is going through the roof.” “We continue to believe that the company is in a strong position to capture its fair share of the AI chatbot market demand wave with its technology providing more use cases going forward,” wrote Wedbush Securities analyst Dan Ives in a February be aware. SOUN YTD mountain SoundHound shares in 2024 Whereas the Nvidia funding is not new information for traders and analysts, it does reinforce SoundHound’s worth proposition. Ives additionally famous that the stake “solidifies the company’s brand within the AI Revolution” and lays the groundwork for a possible bigger funding sooner or later. To make sure, comparatively few Wall Road retailers cowl the AI inventory. Slightly over 80% price it with a purchase or obese ranking, with consensus value targets suggesting upside of almost 24%, per FactSet. The corporate additionally sits at a roughly $1.7 billion market capitalization and has but to achieve profitability. Increasing its whole addressable market Together with its Nvidia relationship, SoundHound has partnered with a slew of common restaurant manufacturers, automakers and hospitality corporations to offer AI voice buyer options. Whereas the corporate works with about quarter of whole vehicle corporations, “the penetration into that customer set only amounts to 1-2% of global sales, leaving significant room for growth within the current customer base as well as growth from adding new brands,” mentioned Ladenburg Thalmann’s Glenn Mattson in a January be aware initiating protection with a purchase ranking. “With voice enabled units expected to grow to 70% of shipments by 2026, this represents a significant growth opportunity, in our view,” he added. SoundHound has additionally made important headway throughout the restaurant trade, just lately including White Fort, Krispy Kreme and Jersey Mike’s to its rising record of consumers, analysts be aware. That whole addressable market ought to proceed rising as main gamers resembling McDonald’s, DoorDash and Wendy’s hunt for tactics to broaden AI voice use, mentioned D.A. Davidson’s Gil Luria. He estimates an $11-billlion whole addressable market when accounting for the rapid alternatives from fast service eating places and unique tools producers. “SoundHound’s long term opportunity is attractive and largely up for grabs,” he mentioned in a September be aware initiating protection with a purchase ranking. “Given the high degree of technical complexity required to create value in this space, we see SoundHound with its best-of-breed solution as a likely winner and expect it to win significant market share.” Headwinds to profitability Whereas demand for SoundHound AI’s merchandise seems to be accelerating, traders ought to watch out for a bumpy street forward. Cantor Fitzgerald’s Brett Knoblauch famous that being within the early levels of product adoption creates uncertainties surrounding the “pace of revenue growth and timeline to positive FCF.” Though H.C. Wainwright’s Scott Buck views SoundHound’s important bookings backlog and accelerating income progress as supportive of a premium valuation, he famous that the latest acquisition of restaurant automation expertise firm SYNQ3 might delay profitability to subsequent yr. However “we suspect the longer term financial and operating benefits to meaningfully outweigh short-term profitability headwinds,” he mentioned. “We recommend investors continue to accumulate SOUN shares ahead of stronger operating results.”
