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It’s been about two years since the launch of OpenAI’s ChatGPT kicked off the generative artificial intelligence (AI) hype cycle. Industry leaders have liked it ever since Nvidia And Super microcomputer have added billions to their market cap by offering supporting hardware.
However, consumer-oriented AI software does not appear to have reached its full potential yet. Let’s explore why SoundHound AI (NASDAQ: SOUND) could be an excellent way for investors to bet on this side of the odds.
A company with a clear practical use
Despite his market capitalization At just $1.8 billion, SoundHound AI is not a young company. The company, founded in 2005, has spent two decades working on speech recognition software designed to interpret human voices. This technology is highly synergistic with major language models (LLMs) because it enables the AI behind text-based chatbots to interact with humans in more realistic scenarios such as drive-thrus and car infotainment systems.
SoundHound is especially impressive for its partnerships with mainstream consumer companies. In July, the company rolled out its voice assistant with integrated ChatGPT Stallantis vehicles in various European markets. This feature allows drivers to ask general questions or help find destinations such as scenic routes or specialty restaurants.
Soundhound also partners with several fast food chains such as White Castle, Jersey Mike’s and Krispy Kreme, which ones are testing its voice assistants in their drive-thrus. These partnerships are a vote of confidence in SoundHound’s speech recognition technology and can help make it happen network effects and an economic moat in what could ultimately become a highly competitive industry
An eye on the future
SoundHound isn’t the only company dabbling in speech recognition software and AI. By 2022, Microsoft bought Nuance Communications (the company behind From Apple Siri) for $19.7 billion. And tech giants love it Googling And Amazon also invest in the technology through its own R&D. SoundHound is a relatively small fish in this big pond.
That said, SoundHound is working to create a unique niche by focusing on automotive and restaurant-related applications. Management has embarked on a slew of acquisitions to expand its competencies.
In June, SoundHound acquired Allset, an online ordering platform designed to connect restaurants with local consumers without third-party delivery apps. This deal follows last year’s merger with SYNQ3 Restaurant Solutions, which has a portfolio of more than 10,000 restaurants signed up for its voice AI services. According to management, these mergers will help move SoundCloud closer to its goal of creating a “voice commerce ecosystem” that will likely synergize with cars, TVs and smart devices.
In March, hardware giant Nvidia invested $3.4 million in SoundHound stock. And the two companies are collaborating through Nvidia’s autonomous driving solution ‘Nvidia Drive’, where SoundHound will deliver its voice AI functionality.
Is SoundHound AI a purchase?
For most investors, SoundHound’s operating momentum is its most attractive feature. Second quarter sales increased by 54% year after year to $13.5 million, while operating losses rose 33% to approximately $22 million. Being losses normal for growth-oriented companies as they scale their operations. And with approximately $200 million on its balance sheet, SoundHound can sustain several more quarters of its current cash burn before has to turn to external sources of capital.
SoundHound’s mounting losses and unclear path to profitability may turn off more risk-averse investors, and that’s understandable. However, the stock remains an excellent way to add exposure to the software side of the AI opportunity as part of a diversified portfolio.
Should you invest $1,000 in SoundHound AI now?
Consider the following before purchasing shares in SoundHound AI:
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Wil Ebiefung has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Apple, Microsoft and Nvidia. The Motley Fool recommends Stellantis and recommends the following options: long January 2026 $395 calls at Microsoft and short January 2026 $405 calls at Microsoft. The Motley Fool has one disclosure policy.
These are my best AI growth stocks to buy right now was originally published by The Motley Fool