Key Points
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SoundHound AI has rapid revenue growth but steep losses.
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Most of its Q3 loss was due to a one-time accounting charge.
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SoundHound has some similarities to Palantir from three years ago.
- 10 stocks we like better than SoundHound AI ›
The dramatic rise in tech stocks over the last two years has made a lot of investors wealthier — and that’s something to celebrate! But when we’re done patting ourselves on the back for a job well done with Nvidia, Alphabet, and Palantir Technologies, it’s time to look for the next big thing.
That’s because it’s easier to have dramatic gains when you’re starting with a smaller market capitalization. Palantir had a market cap of less than $50 billion when I first bought the stock in 2022, and its current $431 billion market cap now makes it one of the largest companies in the world.
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Its stock has gained 2,210% since July 2022. And if it were to gain another 2,210% in the next three years, it would have a market cap of $10 trillion — more than twice as large as the current market leader, Nvidia.
Obviously, that’s not happening. To find an artificial intelligence (AI) stock with the potential for a Palantir-size gain over the next three years, we need to examine one that still has significant growth ahead. One that I’m considering right now is a stock I’ve been skeptical about in the past: SoundHound AI (NASDAQ: SOUN).
Image source: Getty Images.
What is SoundHound AI?
SoundHound operates an AI platform that allows users to have conversations to use voice-enabled services and apps. Voice-enabled products have been around for a long time — for example, automated customer-service phone numbers and voice assistants such as Siri and Alexa. However, the early iterations of this technology were clunky enough to create significant user frustration.
SoundHound, which went public in 2021, primarily worked in the automotive and restaurant industries before taking a significant step forward in 2024 with its $80 million acquisition of Amelia AI, an AI agent that is customizable for internal use or public-facing applications.
The acquisition pushed SoundHound’s corporate client base to more than 200 customers. However, the company still hasn’t been able to turn a profit, and investors may have signaled this year that they’re becoming concerned about the stock: Shares are down more than 40% this year.
Part of the problem may be the company’s third-quarter earnings report, which showed a sharp net loss of $109.3 million, versus a loss of $21.7 million a year ago. The loss wiped out its impressive $42 million in revenue, which was up 68% from a year ago.