Artificial intelligence (AI) technology is reshaping industries, driving innovation, and transforming business operations. Demand for AI solutions will soar as companies pour billions of dollars into building out AI infrastructure. This growing demand creates opportunities for significant revenue growth for companies at the forefront of this technology and provides the foundation for long-term capital gains. For investors, AI stocks offer a unique opportunity to capitalize on this transformative technology.
While many AI stocks are currently trading at high prices due to strong investor enthusiasm, there are still opportunities to get into the space without spending a fortune. One such stock is SoundHound (SOUN), which specializes in voice AI technology. Trading for under $10, SoundHound shares are an affordable investment for any investor looking to get into the AI industry. In addition to the low price, analysts are bullish on the company's prospects, suggesting that the stock has growth potential.
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With this backdrop in mind, let’s explore what makes SoundHound an attractive investment for those looking to get into AI with a lower barrier to entry.
SoundHound: A Voice AI Leader Expected to Grow
SoundHound has emerged as a leader in the voice AI space. The company has consistently maintained growth rates of over 50%, expanding market share and gaining new enterprise customers while continuing to strengthen its balance sheet.
The company's recent financial results confirm its strong growth trajectory. In the second quarter, SoundHound's revenue increased 54% driven by increased product adoption by enterprise customers. SoundHound's cumulative subscription and booking backlog nearly doubled year-over-year to $723 million, reflecting growing demand for its AI-powered solutions. Additionally, the annual execution rate of queries processed by the company's technology now exceeds 5 billion, indicating an exponential increase in engagement.
Key to this growth are SoundHound's innovative AI solutions, particularly SoundHound Chat AI and its AI customer service offerings. These products have been well received in the market and are driving the company's financials. SoundHound Chat AI, which integrates large language models (LLMs) with AI assistance, has seen strong adoption. Additionally, the technology represents an attractive upsell opportunity for SoundHound, potentially leading to increased loyalty revenue from existing customers.
In addition to the upside, SoundHound executives said automakers are willing to pay more for its SoundHound Chat AI, suggesting the company's revenue per vehicle could increase as adoption expands.
Demand for SoundHound's products is not limited to the automotive industry: In the second quarter, SoundHound signed agreements with three major quick service restaurants (QSRs), bringing its top-tier QSR clients to five, demonstrating SoundHound's ability to win significant business across multiple verticals.
The company's phone ordering system continues to expand. In addition, SoundHound Smart Answering is gaining popularity across a variety of industries, including retail, personal care, and professional services. The broad scope of SoundHound's Smart Answering makes it a highly scalable product, potentially creating a large market opportunity.
In summary, SoundHound's proprietary voice AI technology has created a strong competitive advantage, positioning the company for long-term success in the customer service space.
Strategic Acquisitions to Drive Growth
In addition to organic growth, SoundHound's acquisition strategy is expected to accelerate the company's expansion. The recent acquisition of Amelia, a leader in conversational AI, is an important step. The move will help the company build a comprehensive voice AI ecosystem. The acquisition is expected to provide SoundHound with new opportunities and strengthen its ability to provide conversational intelligence solutions to various verticals. Furthermore, it will add a stable recurring revenue stream and strengthen its financials.
Similarly, the acquisition of key assets from Allset, a digital ordering platform, will further strengthen the company's position in voice commerce and contribute to establishing a strong voice commerce ecosystem.
Collectively, these strategic moves will help SoundHound penetrate new verticals and enterprise brands, enhancing its long-term growth potential.
Set yourself up for long-term success
As AI and voice technology continue to gain traction, SoundHound's target market is expected to expand significantly over the next few years. Additionally, enterprise spending on generative AI is expected to increase significantly, providing a strong tailwind for the company.
SoundHound's leadership in voice AI, strong financial performance, growing customer base and strategic acquisitions position it for stable long-term growth, making it an attractive opportunity for investors looking to gain exposure to the fast-growing AI industry at an affordable price.
Analysts share this optimism, with SOUN receiving a “Strong Buy” consensus rating from the six companies covered.
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SOUN shares have risen by more than 137% year-to-date. Additionally, the average Wall Street price target for SOUN shares is $7.58, indicating an upside potential of about 50.6% from current price levels.
On the date of publication, Amit Singh did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart's disclosure policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
