AI Stocks Surge: Wall Street Bullish on SoundHound AI and Nvidia's Strategic Investments

Wall Street Analysts Are Bullish on This Artificial Intelligence (AI) Stock. Here's Why I'm Not. | The Motley Fool

An impressive client list and a partnership with Nvidia may be insufficient to save this stock. After years of struggle, SoundHound AI (SOUN 3.56%) seems to have found its place in the tech industry. As the company settles on becoming a leader in voice recognition software, it has won contracts from various companies and an investment from AI chip leader Nvidia. Despite those successes, SoundHound faces ongoing losses and significant difficulties on the financial side of the business. Given the severity of those challenges, investors and analysts appear to have taken an overly bullish stance on the SaaS stock. The company's $1.6 billion market cap makes SoundHound AI a small-cap stock. However, despite its size, companies as varied as Qualcomm, Stellantis, and Netflix have contracted with the company. It was this customer portfolio that inspired Nvidia to invest in SoundHound stock. Investors seemed to become even more optimistic after learning the company would introduce a voice recognition product powered by Nvidia Drive, a hardware and software platform designed to power autonomous vehicles. In June, five of seven analysts rated SoundHound a strong buy or a buy, with none issuing a sell recommendation. Admittedly, such a partnership appealed to investors and offered significant help to SoundHound AI stock, at least for a time. When news of the investment broke in March, other investors bought into SoundHound AI stock, which rose to an intraday high of $8.91 per share, its highest point in nearly two years. Nonetheless, even that deal was not enough to sustain its stock price growth. A little more than a month later, SoundHound had fallen to nearly $3.50 per share, and even with a revival, it sells for around $5 per share at the time of this writing. Despite its attributes, SoundHound seemed to have overlooked its formidable competition. Apple, Alphabet, and Amazon each have cash positions far larger than SoundHound's market cap, calling into question whether it can compete in the long term. Despite the stock's difficulties, its growing customer and partner base helped its top line. In the first quarter of 2024, revenue of $12 million increased by 73% annually, a dramatic improvement over the 47% yearly revenue gain in 2023. Still, analysts may have ignored the fact that the positive financial news appears to end there. SoundHound's operating expenses for the same period amounted to just over $40 million, almost 3.5 times higher than its revenue. After adding in $4 million of additional expenses, its Q1 net loss was $33 million, an increase from $27 million in the year-ago quarter. Amid its losses, SoundHound held about $212 million in cash at the end of Q1. Regrettably, it had to significantly dilute its shareholders to build that cash. Currently, the number of outstanding shares tops 329 million, but at the end of 2022, this number stood at just 198 million. This means it increased the number of available shares by 66% in 15 months, significantly devaluing the holdings of its investors. Moreover, those diluted shares appear significantly overvalued. As a money-losing company, it does not have a P/E ratio, and even with its movements, SoundHound AI still sells at a price-to-sales (P/S) ratio of 24. While not at its highest level, paying such a sales multiple for a stock with little hope of earning a profit makes SoundHound a high-risk holding. Although an impressive client base and an Nvidia partnership might stoke some optimism in SoundHound AI, the stock remains highly risky. Even with key partners and high analyst ratings, the company spends more than three times its revenue in costs and expenses to continue its operations. Also, to raise enough cash to keep its doors open, it has had to heavily dilute its shareholders. Even worse, such drastic actions may not be enough to help it compete with its well-funded peers. Given the above conditions, the risks probably exceed any potential reward with SoundHound AI stock.

SoundHound AI Gains 27% in a Month: Should You Buy? - ServiceNow (NYSE:NOW), (INFY)

SoundHound AI SOUN shares have jumped 27.3% in the past month, outperforming the Zacks Computer & Technology sector's decline of 6.4% and the Zacks Computers - IT Services' growth of 5.2%. SoundHound AI is benefiting from a strong portfolio, a strong partner base and an expanding clientele. SOUN offers conversational intelligence through independent Voice AI solutions in 25 languages in both cloud-enabled and hardware-embedded devices. Its prospects benefit from a massive addressable market worth more than $140 billion that includes diverse industries like automotive, restaurants, customer service, entertainment, Smart TVs and Internet of Things (IoT) powered devices. SoundHound AI had $682 million in cumulative subscriptions and bookings backlog at the end of the first quarter of 2024, up 80% year over year, with an average duration of about seven years. This reflects the strong demand for SOUN's solutions. It expects revenues between $65 million and $77 million for 2024. The Zacks Consensus Estimate for SOUN's 2024 revenues is pegged at $71.01 million, indicating year-over-year growth of 54.8%. The consensus mark for 2024 loss is pegged at 30 cents per share, which has narrowed by three cents over the past 30 days. SoundHound AI, Inc. Price and Consensus SoundHound AI, Inc. price-consensus-chart | SoundHound AI, Inc. Quote SOUN now expects to surpass $100 million in revenues with positive adjusted EBITDA in 2025. The Zacks Consensus Estimate for SOUN's 2025 revenues is pegged at $103.91 million, indicating year-over-year growth of 46.3%. The consensus mark for 2025 loss is pegged at 18 cents per share, narrower by four cents over the past 30 days. SOUN Stock Beats Sector YTD Year to date, SOUN shares have surged 133.5% year to date, outperforming the broader Zacks Computer & Technology sector's return of 16.5% and the Zacks IT Services industry's gain of 0.9%. SoundHound AI has also outperformed industry peers like ServiceNow NOW, Infosys INFY and Vertiv VRT over the same timeframe. NOW, INFY and VRT shares have gained 13.1%, 23% and 52.1%, respectively. YTD Performance Image Source: Zacks Investment Research However, SOUN stock is not so cheap, as the Value Style Score of F suggests a stretched valuation at this moment. In terms of the forward 12-month Price/Sales ratio, SoundHound AI is trading at 18.14X, higher than its median of 8.85X and the Zacks Computer & Technology sector's 6.18X. Price/Sales Ratio (F12M) Image Source: Zacks Investment Research SOUN Stock to Benefit From Expanding Footprint SoundHound AI's prospects benefit from its expanding footprint in industries like automotive and restaurants, driven by its innovative portfolio. It has more than 270 patents currently, with over 155 granted and more than 115 pending. Automotive presents a significant growth opportunity for SOUN. TAM for the global light vehicle auto market is currently pegged at roughly 88 million and is expected to hit 95 million units by 2028. SOUN has strengthened its footprint in the automotive industry by introducing its advanced SoundHound Chat AI voice assistant, integrated with ChatGPT, into Peugeot, Opel and Vauxhall vehicles across 11 European markets, including Austria, France, Germany, Italy, Spain and the U.K. SOUN's collaborations with NVIDIA, ARM, Perplexity, Olo and Oracle are expanding its portfolio. SoundHound AI launched an advanced in-vehicle voice assistant leveraging NVIDIA DRIVE, enabling real-time and generative AI capabilities for seamless, offline access to vehicle intelligence and personalized assistance. SoundHound AI partnered with Perplexity to enhance SoundHound Chat AI through the integration of the latter's online Large Language Model capabilities for advanced, real-time voice assistant responses. TAM for the restaurant market is currently pegged at roughly $3.3 trillion and is expected to hit $4.4 trillion units by 2028, thereby offering significant growth prospects for SoundHound AI. SOUN partnered with Olo to bring its voice AI technology to approximately 77,000 restaurant locations, enabling high-speed, accurate order processing and enhancing the guest experience. It announced the integration of its Smart Ordering voice AI technology with Oracle MICROS Symphony point-of-sale (POS) for restaurants, enhancing order efficiency and customer experience in the hospitality industry. SOUN's acquisition of SYNQ3 bolstered its presence in the restaurant sector, contributing positively to the revenue mix and customer base expansion. The acquisition of SYNQ3 added approximately $3 million to SoundHound's revenue in the first quarter of 2024. The acquisition of key assets from Allset, an online ordering platform that connects restaurants with local customers, enhanced its capabilities in Voice AI. Conclusion SoundHound AI is a risky bet for growth-oriented investors, given the uncharted Voice AI domain. However, its innovative portfolio makes SOUN well-positioned to benefit from the strong TAM of global automotive and restaurant markets. This Zacks Rank #1 (Strong Buy) stock has a Momentum Style Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. To read this article on Zacks.com click here. Market News and Data brought to you by Benzinga APIs

EXCLUSIVE: 'Restaurants Are To SoundHound AI What Books Were To Amazon,' CEO Tells Benzinga - SoundHound AI (NASDAQ:SOUN)

The company has diversified into the restaurant industry and beyond, and is eyeing a $100 billion TAM in North America. In an exclusive interview with Benzinga, Keyvan Mohajer, CEO of SoundHound AI Inc. SOUN, shed light on the company's recent endeavors and its vision for the future. SoundHound AI is rapidly advancing its footprint in the AI landscape, as underscored by Mohajer during the interview. The company's innovative approach is capturing attention across multiple sectors, from automotive to hospitality, with its cutting-edge voice AI technology. SoundHound AI's Cutting-Edge In-Car Voice AI SoundHound AI has made waves with the deployment of its Chat AI voice assistant in European automotive brands, showcasing its market agility. As Mohajer proudly states, "Not only were we the first voice assistant provider to integrate generative AI, we were also the first to pilot and launch anywhere in the world." This cutting-edge in-car voice AI has been launched with six major automotive brands, witnessing a significant rise in usage. Mohajer highlights this success: "Agility and quality are tough to achieve in tandem, but thanks to our long history in voice AI and our highly extensible platform, we've achieved it." 'Our OEM Partners Really Value This' The partnership with Stellantis NV STLA is a pivotal milestone for SoundHound AI. Mohajer explains, "We've been working with the automotive industry for nearly a decade, and now millions of vehicles across the globe use our in-vehicle voice assistant in more than 20 languages." This long-standing experience allows SoundHound to manage risks and deliver value. "Our OEM partners really value this," Mohajer adds, emphasizing the company's unique offering of control over brand and data. SoundHound AI's expansion into 17 markets by the end of July highlights its growing influence. The company's voice technology integrates vehicle controls and real-time data with generative AI responses, offering a seamless user experience. "What is new for the company is that more auto brands in those markets are fully embracing our category-leading assistant, which combines vehicle controls, real-time data (like weather and navigation), and generative AI responses," Mohajer said. With enthusiastic responses from OEMs globally, SoundHound AI is setting a new standard in the automotive AI landscape, solidifying its competitive edge. Read Also: What's Going On With SoundHound AI Stock? 'Restaurants Are To SoundHound AI What Books Were To Amazon,' Says CEO SoundHound AI is also making waves in the restaurant industry, with over 10,000 locations already using its AI technology. Mohajer likens the company's foray into AI customer service to Amazon's early book sales, stating, "Restaurants are to SoundHound AI what books were to Amazon. In time, we look forward to using our extensive AI know-how and leveraging the very latest technology to provide best-in-class solutions right across industries." The company's AI now supports various industries, including fitness and personal care, with over 100,000 locations in the pipeline. Mohajer is confident about the future, saying, "We believe AI customer service will be as necessary to every business as wifi and electricity and that creates an incredible opportunity for SoundHound." Eyeing A $100B TAM In North America Alone SoundHound AI's multi-industry approach is built on a three-pillar revenue strategy. "At SoundHound we have a three pillar revenue strategy... we provide a branded digital assistant like SoundHound Chat AI to physical products like cars (as discussed), but also TVs, and smart devices," Mohajer said. The strategy not only involves providing voice-enabled products, but also AI customer service solutions that operate on a subscription model. "We're also seeing huge growth in this area, often driven by labor shortages. We estimate its size to be a $100 billion TAM in North America alone," he noted. SoundHound's ambitious plans aim to create a seamless voice commerce ecosystem, ultimately generating new revenue streams while enhancing user experience. "We're building the voice commerce ecosystem of the future, and the revenue of this pillar is monetization revenue," Mohajer said. As SoundHound AI continues to evolve and expand, investors should monitor its strategic partnerships, global market entries, and industry-specific implementations to gauge the company's future potential and market position. Read Next: EXCLUSIVE: SoundHound's AI Voice Technology Revolutionizes Restaurant, Automotive Industries Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

99.9% of Nvidia's $380 Million Investment Portfolio Has Been Put to Work in These 4 Artificial Intelligence (AI)-Inspired Stocks | The Motley Fool

Artificial intelligence (AI) colossus Nvidia has stakes in five publicly traded companies -- four of which account for almost every cent of its AI-driven portfolio. Arguably no trend has been hotter on Wall Street over the last year and change than artificial intelligence (AI). Put simply, AI allows software and systems to oversee tasks that would normally be assigned to humans. The game-changing growth potential AI brings to the table has everything to do with software and systems being able to learn without human intervention. This would make AI-driven systems more proficient at their assigned tasks over time, as well as allow software and systems to evolve and learn new skill sets. It's this broad-reaching potential for artificial intelligence that led analysts at PwC to estimate the technology will add $15.7 trillion to worldwide gross domestic product come 2030. No publicly traded company has benefited more directly from the AI revolution than semiconductor behemoth Nvidia (NVDA -7.04%). After delivering $27 billion in net sales and almost $4.4 billion in net income in fiscal 2023 (Nvidia's fiscal year ends in late January), the company is pacing $120 billion in revenue and north of $64 billion in net income for the current fiscal year (ended January 2025). In short order, Nvidia's H100 graphics processing unit (GPU) became the clear-cut choice by businesses wanting to train large language models and run generative AI solutions. Overwhelming demand for the company's hardware, coupled with its CUDA software keeping developers contained within its ecosystem, have helped to drive up the selling price of its GPUs. Long story short, Nvidia is absolutely swimming in operating cash flow. While a sizable chunk of its cash is being put to good use -- i.e., ongoing research and development to sustain its AI compute advantage -- Nvidia has also been investing some of its cash into promising companies in the AI arena. Although Nvidia owns stakes in five publicly traded companies, based on its Form 13F from the first quarter and a recently filed Form 4 with the Securities and Exchange Commission (SEC), four of these holdings account for 99.9% of its $380 million AI-inspired investment portfolio. The lion's share of Nvidia's roughly $380 million investment portfolio belongs to intellectual-property (IP)-driven semiconductor company Arm Holdings (ARM -6.00%). Nvidia closed out the March-ended quarter with 1,960,784 shares of Arm, equating to more than $292 million in market value, as of the closing bell on July 26. Shares of Arm have nearly tripled since its initial public offering (IPO) at $51 last September. Whereas most semiconductor companies are clamoring to be the king of hardware, Arm Holdings has found a unique niche that allows it to effectively sit back and collect royalties and licensing fees. Arm develops and designs central processing units, GPUs, and systems IP. Companies like Nvidia use Arm's designs for their chips, which allows Arm to collect royalties and/or licensing fees. It's a high-margin operating model without the overhead that can, at times, cripple traditional chip companies. When Arm reported its fiscal fourth quarter results in May for the period ending on March 31, 2024, it signaled that the rise of AI, and the need for more energy-efficient designs, should be key drivers for its royalty revenue stream moving forward. The second-largest holding in Nvidia's AI-fueled $380 million investment portfolio is clinical-stage biotechnology company Recursion Pharmaceuticals (RXRX -2.93%). The 7,706,363 shares of Recursion held by Nvidia work out to a market value of more than $64.3 million, as of July 26. Recursion is attempting to differentiate itself from other drug developers by heavily leaning on machine-learning technology to assist with the innovative process. The company's supercomputer (BioHive-2), which is powered by Nvidia's hardware, has collected copious amounts of data in an effort to understand the interaction between biology and chemistry. The goal here is to make logical assumptions about which pathways to disease treatment are likely to be successful. While it's a neat concept on paper, it's not yet clear if this Ai-driven approach will be successful. Recursion Pharmaceuticals currently has five experimental therapies in clinical trials, which range from rare-disease therapeutics to cancer drugs. With preliminary or topline data readouts expected for four out of these five trials by the midpoint of 2025, we should soon have a good idea of whether or not relying on AI in the drug-development process is a potential game changer. Nvidia's third-largest position, which was revealed via a recent Form 4 filing with the SEC, is autonomous sidewalk delivery company Serve Robotics (SERV -22.64%). The AI kingpin converted a debt note it held into 1,050,129 shares of Serve Robotics, which was worth close to $13.9 million, as of the end of last week. The intrigue for Nvidia may have everything to do with the massive -- but still largely unproven -- addressable market associated with robotic and drone delivery. Cathie Wood's Ark has estimated that autonomous delivery can be worth $450 billion by the turn of the decade. Serve Robotics' autonomous food delivery robots aim to reduce the reliance on vehicles (making life safer for pedestrians), as well as lower costs for businesses and consumers. Although Serve has raised plenty of capital recently, it's sort of in the same boat as Recursion Pharmaceuticals in the sense that it's too early to tell if the idea if viable and scalable. First-quarter sales, while up triple-digits on a sequential quarterly basis, totaled just $950,000 -- much of which was based on software revenue recognition. Sizable losses are expected as Serve Robotics ramps up its operations and tests its autonomous delivery robots in new markets. The fourth artificial-intelligence-inspired stock that, along with Arm Holdings, Recursion Pharmaceuticals, and Serve Robotics, accounts for 99.9% of Nvidia's approximately $380 million investment portfolio is voice-recognition software up-and-comer SoundHound AI (SOUN 3.56%). The 1,730,883 shares of SoundHound held by Nvidia equate to almost $8.9 million in market value. SoundHound aims to capitalize on the rapid growth in voice-based AI by broadening its relationship with restaurants, automakers, and television manufacturers. During the first quarter alone, SoundHound closed its acquisition of SYNQ3, making it the leading voice AI provider for large-scale restaurant chains. SoundHound also forged agreements with Church's Chicken and Dine Brands Global's Applebee's. Growing demand for voice-recognition software sent SoundHound AI's revenue soaring by 73% in the March-ended quarter to $11.6 million. While it's had no trouble landing new partners and growing sales, the company's losses are also widening. SoundHound's generally accepted accounting principles (GAAP) net loss grew by 20% to $33 million in just the first three months of 2024. Having a healthy cash position will be imperative to SoundHound's success as it attempts to expand its reach in a variety of consumer-facing industries.