Voice AI is a $140 billion market alternative, and this firm’s expertise might make it a big-time winner over the approaching years.
Sound and voice add an extra layer to synthetic intelligence (AI) that always appears to fly below the radar. Nevertheless, make no mistake about it, voice AI expertise presents a large alternative and is essential to delivering AI to real-world, consumer-facing functions.
SoundHound AI (SOUN 3.71%) is among the many leaders on this subject, and its inventory value has risen over 205% over the previous three years, even because it nonetheless trades practically 60% under its all-time excessive at present. Whereas the inventory carries some dangers, it is an AI powerhouse that might be simply getting began.
Here is why the inventory might be an enormous long-term winner, and why traders ought to contemplate shopping for and holding the shares at present.
Picture supply: Getty Pictures.
Two the explanation why SoundHound AI stands out on this aggressive area
There is a bit extra nuance to voice AI expertise than a textual content immediate. It has an extra layer, the place a mannequin should hear sound, then translate it into machine language with the correct that means and context, earlier than analyzing it.
SoundHound AI was round lengthy earlier than the AI increase kicked off a couple of years in the past. The corporate started within the automotive trade, the place automobile manufacturers have used its voice AI for functions comparable to hands-free voice instructions. Now, with the use circumstances quickly increasing to incorporate customer support brokers, voice-based ordering, and others, the full addressable market is estimated to be $140 billion.
Nevertheless, the area is very aggressive. There are a number of different voice AI corporations, together with a number of “Magnificent Seven” corporations, who’ve voice AI baked into their broader choices.
SoundHound AI is probably not the most important participant within the subject, but it surely advantages from two distinct benefits.
First, the corporate makes a speciality of voice AI. Typically, an organization that eats, sleeps, and breathes a single factor is healthier than a large firm that does a whole lot of various issues. Focus generally is a highly effective software. Apple‘s years-long struggles with its voice assistant, Siri, illustrate that measurement would not at all times translate to success.
Second, SoundHound AI takes a impartial method with its prospects. It’s going to white-label its expertise, moderately than pressure its emblem on consumer-facing points of its prospects’ services and products. Its stance could make SoundHound AI a preferable accomplice for a lot of manufacturers, very similar to how The Commerce Desk‘s unbiased platform appeals to manufacturers within the digital promoting area.
Progress is red-hot, and the momentum might proceed
One of many hurdles for a promising firm like SoundHound AI is increasing past that preliminary, profitable market area of interest. Luckily, the corporate is increasing past the automotive trade and gaining traction in new market segments. It acquired voice AI firm Amelia final summer season to increase its footprint and now works with among the main eating places, motels, gyms, and different consumer-facing companies.
Acquisitions at all times assist juice progress, therefore the large bounce from $85 million in 2024 income to an estimated $159 million this 12 months. Nonetheless, estimates for subsequent 12 months point out roughly 27% income progress:
Knowledge by YCharts.
SoundHound AI is clearly rising, and the broader demand for AI might proceed to supply the mandatory tailwinds to maintain that progress, so long as the corporate continues to win enterprise.
The inventory’s valuation is cheap sufficient for the inventory to shine over the long run
SoundHound AI’s valuation is steep sufficient to make one pause. The inventory trades at virtually 25 instances 2025 income estimates. That valuation is not so excessive that it dooms the inventory to underperform for years on finish, but it surely does depart the corporate with a tighter margin for error. Progress should proceed, and administration should function the enterprise cleanly.
But when the corporate delivers on its income estimates and sustains comparable progress past subsequent 12 months, the inventory can develop into and past its present price ticket.
SoundHound AI should proceed to distinguish itself from bigger opponents. That is not a given, which makes the inventory a bit dangerous. Nonetheless, that is par for the course with most up-and-coming corporations. If issues go effectively, SoundHound AI’s spectacular voice AI expertise and promising progress potential might yield profitable rewards for traders over the approaching years and past.
Justin Pope has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Apple and The Commerce Desk. The Motley Idiot has a disclosure coverage.
