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Artificial intelligence (AI) technology is reshaping industries, driving innovation, and transforming business operations. As companies pour billions of dollars into building AI infrastructure, the demand for AI solutions will skyrocket. This growing demand presents significant revenue growth opportunities for companies at the forefront of this technology, positioning them for substantial long-term capital gains. For investors, AI stocks offer a unique chance to capitalize on this transformative technology.
While many AI stocks are currently trading at high premiums due to investors’ strong enthusiasm, there are still opportunities to invest in this space without breaking the bank. One such stock is SoundHound (SOUN), which specializes in voice AI technology. Trading under $10, SoundHound stock is well within the reach of every investor seeking exposure to the AI industry at an accessible entry point. Besides its low dollar price, analysts are bullish on its prospects, implying the stock has growth potential.
With this background in mind, let’s explore the factors that make SoundHound a compelling investment for those seeking exposure to AI at a lower entry point.
SoundHound: A Voice AI Leader Poised for Growth
SoundHound has emerged as a leader in the voice AI space. It has consistently grown at a rate of 50% or more and continues to fortify its balance sheet, all while gaining market share and attracting new enterprise customers.
The company’s recent financial performance underscores its strong growth trajectory. In Q2, SoundHound’s revenue surged by 54%, driven by higher adoption of its products from enterprise customers. SoundHound’s cumulative subscriptions and bookings backlog nearly doubled year-over-year, reaching $723 million, reflecting rising demand for its AI-powered solutions. Furthermore, the annual run rate of queries handled by its technology now exceeds 5 billion, indicating a steep rise 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 resonated well in the market, driving its financials. SoundHound Chat AI, which integrates large language models (LLMs) with AI assistance, has seen strong uptake. Moreover, this technology presents a compelling upsell opportunity for SoundHound and will likely drive higher royalty revenues from existing customers.
Adding to the positives, SoundHound’s management said that auto original equipment manufacturers (OEMs) are willing to pay more for SoundHound Chat AI, signaling a potential boost to the company’s revenue per unit as adoption grows.
The demand for SoundHound’s products isn’t limited to the automotive sector. In Q2, SoundHound secured deals with three major quick-service restaurants (QSRs), bringing its top-tier QSR clients to five. This showcases SoundHound’s ability to win significant business across multiple verticals.
The company’s phone ordering systems continue to ramp up. Further, SoundHound Smart Answering is gaining traction in a variety of industries, including retail, personal care, and professional services. The broad applicability of SoundHound’s Smart Answering makes it a scalable product and will likely open up a vast market opportunity.
In summary, SoundHound's proprietary voice AI technology is creating a solid competitive moat, positioning the company for long-term success in the customer service space.
Strategic Acquisitions to Fuel Growth
In addition to organic growth, SoundHound’s acquisition strategy is set to accelerate its expansion. The recent acquisition of conversational AI leader Amelia is a significant step. The move will help the company in building a comprehensive voice AI ecosystem. This acquisition is expected to unlock new opportunities for SoundHound and enhance its capabilities in delivering conversational intelligence solutions across a variety of sectors. Moreover, it will add a solid recurring revenue stream and strengthen its financials.
Similarly, the acquisition of key assets from Allset, a digital ordering platform, further strengthens its position in voice commerce and will help establish a robust voice commerce ecosystem.
Overall, these strategic moves will likely drive SoundHound’s penetration into new verticals and enterprise brands, amplifying its potential for long-term growth.
Positioned for Long-Term Success
With AI and voice technology continuing to gain traction, SoundHound’s target markets are projected to experience significant expansion in the coming years. Moreover, enterprise spending on generative AI is expected to grow substantially, providing a strong tailwind for the company.
SoundHound’s leadership in voice AI, impressive financial performance, expanding customer base, and strategic acquisitions position it well to deliver solid growth in the long term. That's why SoundHound offers a compelling opportunity for investors seeking exposure to the booming AI industry at a reasonable price.
Analysts share this optimism, as SOUN has a “strong buy” consensus rating from the six in coverage.
SOUN stock has gained over 137% year-to-date. Further, Wall Street's average price target for SOUN stock is $7.58, indicating a potential upside of about 50.6% from current price levels.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
