SoundHound AI: Promising Voice AI Startup Faces Growth Challenges and Market Volatility

Thinking of Buying SoundHound AI Stock? Here Are 3 Charts You Should Look at First | The Motley Fool

SoundHound AI has a lot of growth potential, but the stock also comes with a lot of risk. Shares of artificial intelligence (AI) company SoundHound AI (SOUN 1.45%) are down 8% in the past six months as excitement has cooled around the stock. Although the voice AI company is growing at a fairly quick rate, its losses are also rising. The stock has more than doubled in value this year. However, with a market cap of just $1.7 billion, there could still be a lot of upside for investors if its business continues to grow and profitability improves. But with this potential comes commensurate risk, so before you consider investing in SoundHound AI, there are three charts you should see. Profitability is a big concern for SoundHound AI. While the business is getting bigger, so too are its losses. In the second quarter, revenue grew 54% year over year to $13.5 million, but its net loss climbed 60% to $37.3 million. Look at its profit margin trend below, and it's not clear when the company will eventually break even (if ever). While a negative profit margin isn't uncommon for a company in its early growth stages, it's a risk investors need to be aware of. Continued losses will not only weigh on the business but also increase the chances of future dilution. Dilution is another risk for investors who buy shares of a company that's unprofitable. The business needs money to fund its day-to-day operations and growth objectives, but that's not coming from its core business. Instead, management must turn to debt or issue more equity to raise capital. As a result, SoundHound's share count has increased significantly in recent years. The company is already burning through cash with operating cash outflows of $74.5 million over the past 12 months. If its cash flows don't significantly improve, investors should brace for the prospects of additional dilution, which could put downward pressure on the stock price. SoundHound faces a lot of competitors in AI voice services. It may be generating strong growth today, but that doesn't mean it has established a sustainable and defensible competitive advantage in the market. And many investors are betting against the company, expecting it to fail. That's evident through the stock's high short interest. As more short-sellers bet against SoundHound, that can put even more downward pressure on the stock. If the company doesn't show improvements to its cash flow or profitability, there could be more investors shorting the stock. High short interest suggests investors should expect to see a lot of volatility, which adds to a stock's overall risk. Complicating matters further is the stake in SoundHound that Nvidia disclosed earlier this year. If not for the news Nvidia had invested in the business, odds are the stock wouldn't be doing as well as it is now, and it wouldn't be nearly as popular. Accounting for that hype is no easy task, and I'm not too optimistic SoundHound can shore up its financials at the same time large tech companies with massive balance sheets are churning out competing voice AI platforms of their own. The AI stock may be worth keeping on a watch list, but it's hard to make the case it's a good buy right now.

Could Buying SoundHound AI Now Be Like Buying Nvidia in 2023?

The small company's potential to expand in its artificial intelligence niche looks significant. Nvidia's (NVDA -0.01%) stock has been an absolutely incredible performer recently. Since the start of 2023, it rose by more than 800%. Most investors would be thrilled to own a stock that delivered returns like that, but not every company has the potential. It requires a massive growth catalyst to justify such gains. SoundHound AI (SOUN 1.45%) is one company that could have this potential. It's a key player in one niche of the artificial intelligence (AI) sector, and has a massive backlog for its products. SoundHound's product is gaining momentum SoundHound AI's technology can parse human speech and perform various tasks based on what it hears. Among the ways it's already being used most are in processing restaurant orders and improving digital assistants in vehicles, but its capabilities extend far beyond those two use cases. In the automotive segment, SoundHound partnered with Stellantis; the giant automaker will integrate SoundHound's tech into its vehicles across Europe and Japan. This will give people access to generative AI functions while they're driving -- an improvement from the voice assistants that are available on vehicles today. If SoundHound can win business with other automakers and break into other regions, this segment of its business alone could provide it with a huge amount of growth. SoundHound also worked with several companies in the restaurant sector to automate telephone and drive-thru orders, which saves restaurants on wages. According to the company, these AI assistants actually outperform humans in terms of order speed and accuracy, so the customer doesn't feel like the experience declined. Some of SoundHound's restaurant customers, among them White Castle and Jersey Mike's, are fairly big, but there's serious room for it to grow if it can capture some of the largest fast-food businesses. SoundHound AI could achieve even greater success if its solutions are utilized in new applications. But is that potential enough to make its stock the next Nvidia? Nvidia has one key advantage that SoundHound does not In the second quarter, SoundHound generated $13.5 million in revenue, which was up 54% year over year. That's quite small compared to other AI businesses. However, the key figure investors should focus on is SoundHound's backlog, which totals $723 million. This figure doubled from a year ago, showing that rising demand has outpaced SoundHound's capability to integrate its product with its customers' systems. This is factoring into SoundHound's current valuation, as Wall Street has high hopes for the company. SOUN PS Ratio data by YCharts. Trading at 23 times sales, SoundHound stock already carries a premium valuation. By contrast, Nvidia traded for around 15 times forward earnings at the start of 2023. That was a dirt-cheap price, and also a far cry from the forward earnings ratio of 47 it trades at today. SoundHound already has a premium price tag, which detracts from its growth potential from here. But if it can mature into a business that generates $100 million in revenue per quarter, Nvidia-like performance for the stock is still possible. If SoundHound achieved that and carried a valuation of 20 times sales, it would be worth $8 billion, up 370% from its market cap today. That would be a solid return, but still far less than what Nvidia produced. SoundHound stock's premium price tag may prevent it from delivering Nvidia-like returns from here, but that doesn't mean it won't be a great investment. However, it's a bit of a long shot considering the niche use cases for its product and the company's small size. It could make investors some serious money, but don't expect Nvidia-like returns.

Is SoundHound AI Stock a Buy Now? | The Motley Fool

Shares of the company have seen enormous swings, but they remain up over 100% this year. Artificial intelligence (AI) stocks are having their moment in the spotlight. For nearly two years, consumers, businesses, and investors have been betting big on the ability of AI to tackle all sorts of tasks due to the large language model breakthroughs from companies such as OpenAI and Alphabet. One stock on the cutting edge of this industry is SoundHound AI (SOUN). The company -- as its name suggests -- provides voice AI solutions to companies. Though 2024 has been quite volatile, shares are up over 100% year to date as the company delivers double-digit growth while tackling a huge market opportunity. Does that make the stock a buy right now? The goal of SoundHound AI is to provide AI assistants to businesses to help with customer and employee support. This could include voice chatbots for call centers, restaurant drive-thrus, or retail help kiosks. On top of this, it provides voice technology for automotive companies (i.e., the voice platform for your car) and other smart devices. Growth has been strong for the company. The number of queries to a SoundHound AI voice assistant hit an annual run rate of 5 billion as of the second quarter, up 90% year over year. That's proof of the strong adoption of SoundHound AI's services. However, revenue is still small at just $13.5 million last quarter, though it grew 54% year over year. More exciting is the company's subscriptions and bookings backlog, which totaled $723 million last quarter. Business clients lock into long-term deals with SoundHound AI, giving it a huge potential backlog versus the revenue it recognizes each quarter. This backlog figure should lead to more top-line growth in the years to come. Given the boom in AI start-ups, there are many competitors to SoundHound AI popping up. The company has a lead given it was started back in 2005, but there will be increased competition for deals across its addressable sectors. Beyond these these start-ups, there are bigger competitors investors should be concerned about. For example, Alphabet offers Google Cloud Speech-to-Text. It has signed a deal with Wendy's to supply voice automation for its drive-thrus, a win that's in direct competition with SoundHound AI. Alphabet has invested for years to vertically integrate the AI market. From computer chips and data to cloud computing infrastructure and the best research scientists in the world, few companies have the same level of firepower when it comes to AI tools. So, while SoundHound AI may have the edge when it comes to focusing on a small niche within the industry, Alphabet's push into this market should scare shareholders. SoundHound AI has a market cap of $1.65 billion as of this writing. That gives the stock a price-to-sales (P/S) ratio of almost 30 based on its trailing 12-month revenue. To be clear, that's the valuation multiple for sales, not earnings. The company may be putting up strong revenue growth, but a P/S ratio above 10, let alone 20, is not sustainable for most stocks. Even if its valuation was much lower, I wouldn't want to own the stock at these prices. SoundHound AI burned through $75 million of free cash flow over the last 12 months, and it posted a $108 million net loss. This is not a good place to be when competition is only heating up across the AI market, especially from a huge competitor like Alphabet with near-infinite resources. Combined with the nosebleed valuation, SoundHound AI is just too risky a stock to buy right now.

This Artificial Intelligence (AI) Stock Has Exploded in 2024. Is It Still Time to Buy? | The Motley Fool

Shares of SoundHound AI (SOUN) had soared this year. The artificial intelligence (AI) expert, specializing in AI-powered voice controls, has scored a 122% gain year to date. Is there any room left for further growth, or did SoundHound AI already peak? Let's find out. This isn't even the top of SoundHound AI's stock chart mountain. Share prices soared all the way to $8.91 per share in March. At the current price of roughly $4.70 per share, the stock has dropped 54% below that summit. I'll admit that the March rush was a speculative event. I'm sure you already know that AI hardware giant Nvidia (NVDA 1.69%) inspired that jump by disclosing a small investment in the voice interpretation specialist. Nvidia only bought $3.7 million of SoundHound AI stock in 2023, but that disclosure still more than tripled share prices when the purchase was disclosed in mid-February. The purchase was notable because Nvidia doesn't buy shares of other companies very often. Furthermore, SoundHound AI investors were hoping it might be the harbinger of a larger stock-buying move later on or perhaps an outright acquisition of the whole company. None of these ideas have come to pass, and SoundHound AI's stock cooled dramatically. However, the Nvidia investment put this company in the Wall Street spotlight in a whole new way. In addition, SoundHound AI announced a development partnership with Nvidia a few weeks later. The companies have already presented a voice-controlled large language model (LLM) that can manage the Nvidia Drive platform's in-car systems without even connecting to the internet. So, there was some substance to the Nvidia-based speculation, but not quite the all-in investment the most bullish SoundHound AI investors had hoped for. At the same time, the company is in a prime position to deliver torrential sales growth over the next few years. The customer list keeps growing longer and richer, expanding from the automotive industry to restaurant chains and healthcare systems. The Houndify voice interaction system can figure out what you mean to say in a noisy environment, place your words into the proper context, and still run the advanced analysis in real time. There are other speech-to-text systems, but SoundHound AI's solutions stand head and shoulder above the rest thanks to decades of experience. Soaring interest in SoundHound AI's voice controls is building a massive backlog of unfilled orders and long-term contracts. That's not my idea, but a firm number the company reports in every quarterly earnings call. The backlog stood at $723 million in the latest report, up from $339 million a year ago and $283 million the year before that. The order volume isn't just soaring but accelerating. And the average contract length is "slightly less than seven years," up from 6.5 years in the summer of 2023. Those clients are signing up for longer contract commitments over time. These guaranteed sales numbers are impressive for a small-cap company with just $55.5 million of trailing-12-month sales. SoundHound AI's top-line revenues should skyrocket as the company collects revenues in return for delivered services over the next seven years. And don't forget that the backlog keeps growing larger, too. As you can see, SoundHound AI has plenty of growth catalysts going on, and I expect big things from this high-octane growth stock. Meanwhile, the company is expanding its profit margins while going after new target markets. In the long run, SoundHound AI's management wants to "delight" end users across billions of voice-controlled devices, doing better than actual humans in terms of understanding what the user is asking for. The long-term vision is a work in progress, of course. It will take time to deliver these features, especially on a global scale. But the ambition is there, and I don't think SoundHound AI will be a small-cap stock much longer. The stock looks like a great buy in the fall of 2024, and I can't wait to see it evolve over the next couple of decades.

Nvidia Bet Millions on This AI Stock. It's Up 165%. | The Motley Fool

Earlier this year, Nvidia (NVDA -0.18%) revealed that it invested capital in several promising artificial intelligence (AI) companies. Management clearly believed the investments would pay off, but it also positioned the company as a direct enabler of its end markets. After all, Nvidia isn't an AI company itself. Rather, it supplies the AI industry with critical components like graphics processing units, or GPUs. By investing in the overall growth of AI, Nvidia can not only book a potential investment profit, but also spur long-term demand for its own products. No matter how excited Nvidia management was about its capital allocation decisions, few likely predicted what would happen with one of the investments. Following Nvidia's $3.7 million investment in February, SoundHound AI (SOUN -1.07%) saw its valuation soar by 165%. And there could be even more upside to go. Within weeks after Nvidia disclosed its investment in SoundHound, the two companies revealed a partnership that will see their respective products packaged together, including an in-vehicle voice assistant that "uses a large language model (LLM) completely on the edge while running on the Nvidia Drive platform," SoundHound announced in May. In a nutshell, vehicles that run Nvidia's Drive platform will be able to tap into SoundHound's voice recognition platform to provide the driver and passengers with AI capabilities even without an internet connection. The use cases are exciting. You can pull up a song playlist from your favorite streaming provider, ask about the news or current events, or even chat with your car about its maintenance history and potential repair needs in the future. With SoundHound, you car essentially becomes an AI agent, able to converse and consider almost anything you throw at it -- with everything running locally, no connection needed. SoundHound has acquired a reputation for services like this. All, unsurprisingly, deal with the intersection of AI and sound. Several fast-food restaurants are testing its products for drive-thru windows -- a clever way to potentially increase order efficiencies and reduce operating costs. Tech companies have integrated its software into their applications, allowing users to better interact with their services through natural voice commands. And a host of other businesses -- from Block to Oracle -- are already using SoundHound to operate their customer service lines. There's no doubt that Nvidia's investment spurred a spike in SoundHound's valuation. It's a strong vote of confidence, and a promising sign that SoundHound will continue to be able to source the critical components necessary to operate and improve its technology. Wall Street analysts expect the company to grow sales by roughly 84% over the next year, from $83 million to more than $150 million. There's a lot to like about SoundHound. It operates in the AI space -- arguably the biggest growth opportunity in a generation -- and has the backing of major industry suppliers like Nvidia, who put their money where their mouth is. But should you join Nvidia and buy SoundHound shares for your portfolio? According to data from Grand View Research, the voice AI market is projected to grow by nearly 30% annually from 2024 to 2030. Thus far, SoundHound has actually been able to outpace those growth estimates. But now trading at 23 times sales, these high growth rates have arguably already been priced into the stock. That's especially true considering the company will face mounting competitive pressures from global tech giants, nearly all of which are investing billions into their own voice AI platforms. For comparison, SoundHound's total research and development budget is only around $56 million. SoundHound is off to a promising start, but Nvidia's investment put it on the map for many growth investors. If it can fend off rising competition, an investment case could be made for this exciting AI company. But the steep valuation should cause most investors to look elsewhere. Only if you are a huge fan of SoundHound's specific technologies, and are willing to remain invested through years of potential volatility, should you initiate a position alongside Nvidia.

This Artificial Intelligence (AI) Stock Could Be the Biggest Gainer of 2024 (Hint: It's Not Nvidia) | The Motley Fool

This AI stock serves many industries with its exciting technology. Nvidia (NVDA 1.69%) has clearly been one of the market's top performers in recent years. The chip designer has soared 2,600% over the past five years, and this year, the stock is heading for a 148% gain. The reason for such momentum? Nvidia not only dominates the artificial intelligence (AI) chip market, holding 80% share, but has also built an AI empire. The company offers a wide range of products and services -- from enterprise software to networking solutions -- to suit any AI customer's needs. All this has translated into outsize earnings growth, with revenue and profit climbing in the triple digits quarter after quarter -- and margins topping 70%. There's also reason to be optimistic about Nvidia continuing this performance since the company has put a focus on innovation, promising to update its chips once a year. So, Nvidia surely has more gas in the tank to power share gains. But despite all this, another AI stock is gaining on Nvidia this year when it comes to performance. If this continues, this stock could be the biggest winner of 2024. Let's find out more about this high-growth AI stock that may outperform market star Nvidia this year. This player doesn't compete with Nvidia but rather operates in a different yet promising area of AI: AI-driven conversational voice assistants. I'm talking about SoundHound AI (SOUN). The company stands out thanks to its proprietary speech-to-meaning technology, where the platform understands speech as it's happening without having to turn that speech into text first. This results in faster, higher-quality results and gives users the feeling that they're having a natural conversation. And SoundHound's expertise is protected by a solid portfolio of patents, about 155 granted and 115 pending. SoundHound is already conquering various markets, including automotive, restaurant, and customer service -- think ordering food or communicating with your car, for example. The company aims to expand into others, such as financial services and healthcare. All this represents a total addressable market of $140 billion. Speaking of healthcare, SoundHound made a recent acquisition, buying conversational AI player Amelia -- a move that should boost its reach in healthcare and other markets. In fact, SoundHound says the purchase "massively" increases the company's addressable markets, and the combined company now has 200 "marquee" customers. A few weeks after the purchase, SoundHound offered some news regarding its expanded business, saying MUSC Health deployed an Amelia tool to help patients manage their appointments 24/7. How does this translate into earnings? Well, SoundHound isn't yet profitable, but that isn't shocking for a company at this stage of its growth story. Now is the time to spend heavily on research and development (R&D) to secure market leadership and on marketing to grow the customer base. Both of these metrics are on the rise, with R&D climbing 34% year over year in the most recent quarter and marketing spending advancing 11%. And other metrics look very encouraging. For example, quarterly revenue soared 54% to $13.5 million, and the cumulative subscriptions and booking backlog doubled year over year to $723 million. SoundHound has also been receiving more and more queries about its services, showing it's attracted the eyes of potential customers. It's now reached an annual run rate of 5 billion queries. This AI voice giant also has a strong cash position of more than $200 million and has made progress in paying down debt -- signs that it has the financial structure to support growth. Now, let's get back to the subject of stock performance. Today, SoundHound is heading for a 121% increase this year, still lagging behind Nvidia -- but not by all that much. If the AI chip giant's shares stagnate a bit or slip and SoundHound gains more momentum, possibly based on additional contract wins or other positive news, SoundHound could step ahead. Considering earnings and stock performance so far, both companies will likely deliver great performances this year -- they're most of the way to the finish line. But the year isn't over yet. And SoundHound may have what it takes to capture the crown of biggest winner in 2024.

Better Artificial Intelligence Stock: BigBear.ai Vs. SoundHound AI | The Motley Fool

These two disruptive small-caps can deliver big returns for investors. Breakthroughs in artificial intelligence (AI) technology are transforming various industries. Innovations from mega-cap tech leaders like Nvidia have opened the door for emerging companies to capture their slice of a significant market opportunity. BigBear.ai (BBAI 1.34%) and SoundHound AI (SOUN) are two small-caps attempting to leverage unique AI-powered applications into long-term growth. Let's explore which stock could be a better buy for your portfolio. BigBear.ai is developing a suite of proprietary machine learning and computer vision technology into a platform of AI-driven analytical tools. Solutions covering cybersecurity, supply chains & logistics, and autonomous systems have found success with government and commercial markets. The company's advanced facial recognition and image-based threat detection are in use at major airports around the world. BigBear.ai also counts on the U.S. Department of Defense as a customer for its ConductorOS platform. Ultimately, the attraction of BigBear.ai as an investment is the potential that the company can consolidate its leadership in these specialized areas of AI. On the other hand, the operating and financial results have been marred by weaker-than-expected momentum. In the second quarter (for the period ended June 30), BigBear.ai revenue of $40 million climbed by just 3.4% year over year, impacted by the timing of certain large contracts. The other challenge is that profitability remains elusive. The company reported a loss on Q2 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $3.7 million, expanding from a loss of $3.2 million in the year-ago period. BigBear.ai also has more than $134 million in net debt without a clear path for generating free cash flow anytime soon. Those headline numbers aren't great, but there are still enough positives in the outlook for investors to stay upbeat on the stock. Favorably, Q2 revenue was up 20% sequentially from the first quarter, while management is guiding for full-year revenue growth of around 11% from 2023 with an effort to improve margins going forward. What I like most about BigBear.ai is its pure-play exposure to AI in a cutting-edge corner of the technology. The stock is trading at just 2 times its 2024 revenue guidance as a forward price-to-sales (P/S) ratio. This modest level, reflecting the risks associated with poor earnings trends, could prove to be a bargain if the company begins generating stronger and more profitable growth. SoundHound AI has emerged as a leader in conversational artificial intelligence dealing with speech-enabled applications for people to interact with smart devices. The technology is integrated by automakers for in-vehicle voice commands and generative AI as a core part of its business. The company has also expanded into the food service industry, including AI voice-enabled point-of-sale interfaces that fast-food restaurants are increasingly adopting. Earlier this year, SoundHound acquired Amelia, an enterprise AI software specialist, to accelerate the company's customer service solutions, such as virtual call center automation. Indeed, the company's strong point is its diverse portfolio of disruptive offerings. Compared to BigBear.Ai, the trends from SoundHound AI have been much more impressive. The company reported 54% revenue growth in the second quarter (for the period ended June 30) with management citing strong customer momentum across its key industries. The company expects 2024 revenue growth of around 77%, with an initial forecast for 2025 of $150 million, implying an even stronger 88% growth rate next year. At the same time, investors are faced with paying a lofty premium for shares while SoundHound AI remains unprofitable. The company reported negative $13 million in Q2 adjusted EBITDA with negative free cash flow expected to continue for the foreseeable future. In this case, the stock is trading at 20 times its full-year revenue forecast as a forward P/S ratio, which only modestly narrows to 11 based on the 2025 revenue estimate. It appears the market is pricing in a growth runway through the next decade, which could be justified based on the opportunity, but also creates a high level of expectations. That tricky balance adds to the risks SoundHound AI investors must consider. There's a lot to like about BigBear.ai and SoundHound AI, which may both be in the early stages of transformational growth. Recognizing the speculative nature of these two small-caps with an expectation for volatility, I believe SoundHound AI is the better stock to buy today. Its lofty valuation is justified by the company's stronger growth prospects. A position in SoundHound AI stock within a diversified portfolio could work for investors with a long-term time horizon.

2 Growth Tech Stocks With Room to Run, According to These Analysts | The Motley Fool

These stocks have doubled over the last year and can hit new highs in 2025 and beyond. Investors can find monster winners in the stock market by focusing on the rate of a company's growth. It's no secret that artificial intelligence (AI) is fueling strong returns for some companies. SoundHound AI (SOUN 4.54%) and Broadcom (AVGO -0.14%) are two stocks that have soared over the last year based on rapid growth for AI-related products. The good news is that Wall Street analysts still see some upside for these growth tech stocks based on near-term catalysts. Here's why it's not too late to add these two gems to your portfolio. The market for AI technology is expected to expand rapidly in the coming years, and one area that is already seeing explosive growth is conversational voice AI. This technology is having a major impact on customer service and smart ordering, which is fueling strong growth for SoundHound AI. Shares of SoundHound AI are up 135% over the last year, but with a market cap of just $1.7 billion, the company's value could soar over the long term. Cantor Fitzgerald analysts recently upgraded the shares to an overweight (buy) rating with a $7 price target, implying upside of 48% over the next 12 months. Most analysts have a buy rating on the shares with an average price target of $7.79. Wall Street likes SoundHound's recent acquisition of Amelia, which accelerates the company's market expansion. SoundHound has a growing base of customers in the restaurant and automotive industries, but Amelia's leading enterprise AI software will allow SoundHound to serve large banks, retailers, and other Fortune 500 companies. SoundHound is benefiting from great momentum right now. Revenue continues to grow quickly, up 54% year over year in Q2. The only negative remains losses on the bottom line, but the company's subscription-based business model, along with opportunities to earn royalties when software developers use its technology, will allow profitability to improve as the business grows larger. Wall Street's price targets are usually based on a projection of where the share price can trade in the next 12 months or so, but investors who hold the stock for several years could see even greater returns. The company's strong growth shows a wide-open market for voice AI technology, and SoundHound is well-positioned to be a leader. The growing adoption of AI in data centers is driving tremendous demand for leading suppliers of semiconductors and storage solutions, which is an opportunity for Broadcom. Its products help move data securely in servers, computers, smartphones, routers, storage devices, and cars. The stock has been a solid performer in recent years but has rocketed 107% over the last year due to exploding demand for Broadcom's AI-related business in data centers. J.P. Morgan analyst Harlan Sur has an overweight (buy) rating on the shares with a $210 price target. Broadcom's momentum could fuel the stock to new highs in the near term. Revenue grew 47% year over year in fiscal Q3 ending Aug. 4, driven mostly by the additional revenue from the acquisition of VMware, but also from strength in AI semiconductor solutions. Revenue from custom AI accelerators grew over threefold compared to the year-ago quarter. Most analysts still like Broadcom's prospects because non-AI markets could pad the company's revenue in calendar 2025. The company reported strong growth overall in non-AI bookings, indicating a strong recovery underway. Management raised its full-year revenue guidance to $51.5 billion, representing year-over-year growth of 43%. Wall Street expects Broadcom's earnings to grow 19% on an annualized basis in the coming years. With the stock trading at a forward price-to-earnings multiple of 28 on next year's earnings estimate, investors are getting solid value for the shares that could support excellent returns.

2 Artificial Intelligence Stocks That Could Deliver Explosive Gains | The Motley Fool

These two AI innovators are reshaping drug discovery and voice technology - find out why Wall Street sees major upside ahead. Artificial intelligence (AI) is poised to revolutionize the global economy. By 2030, AI could add $15.7 trillion to worldwide GDP, a 26% increase, according to a report by PwC, a leading global consulting firm. This projected growth is expected to stem from significant productivity gains and increased consumer demand. A study by the World Economic Forum, an international organization for public-private cooperation, found that 70% of companies are already integrating AI into their operations. Their research suggests that North America and China are likely to benefit the most from this AI-driven economic expansion. As AI reshapes industries and the global economy, investors actively seek opportunities within this megatrend. While the AI landscape offers many investment options, two companies currently stand out as particularly promising. Let's delve into the core investment thesis for these two high-potential AI stocks. Recursion Pharmaceuticals (RXRX 0.83%) is pioneering a unique approach to drug discovery by leveraging AI and machine learning. The company's Recursion OS platform uses sophisticated algorithms to analyze vast biological and chemical datasets, uncovering potential drug candidates at an unprecedented scale and speed. Wall Street analysts see a significant upside, with the consensus 12-month price target implying nearly 65.9% potential gains from current levels. Recursion recently announced plans to merge with Exscientia, another leading AI drug discovery company. This combination aims to create a powerhouse in AI-driven pharmaceutical research, bringing together complementary technologies and pipelines. The merger rationale highlights several key advantages. The combined entity will have approximately 10 clinical readouts expected over the next 18 months, with most programs targeting billion-dollar market opportunities if successful. Together, Recursion and Exscientia have collaborations with major pharmaceutical companies like Roche, Bayer, and Sanofi. These partnerships could generate over $20 billion in potential milestone payments. Integrating Exscientia's precision chemistry tools with Recursion's biology exploration platform could accelerate drug discovery timelines and improve candidate quality. Recursion's stand-alone business is also making strides. The company recently announced that Roche/Genentech optioned its first neuroscience phenomap, triggering a $30 million payment. This development validates Recursion's unique mapping approach to drug discovery. SoundHound AI (SOUN) is a leader in conversational intelligence, developing advanced voice AI solutions for businesses across industries. The company's technology powers voice assistants and customer service interfaces for major brands in automotive, restaurants, and more. Wall Street is exceptionally bullish on SoundHound's near-term prospects, with the consensus price target suggesting a robust 66% upside potential from current levels. What's driving this optimistic outlook? SoundHound's Q2 2024 results demonstrated strong momentum across key metrics. The company reported impressive year-over-year revenue growth of 54%, reaching $13.5 million for the quarter. Moreover, SoundHound's cumulative subscriptions and bookings backlog nearly doubled to $723 million, while query volume surged approximately 90% from the previous year. The company is also rapidly expanding its presence in the customer service space. SoundHound recently acquired Amelia, an enterprise-focused conversational AI company, to accelerate growth in this market. The combined entity will serve nearly 200 marquee customers, including top global banks and Fortune 500 companies. SoundHound's voice assistant with generative AI capabilities is gaining significant traction in the automotive industry as well. For example, multiple Stellantis brands, including Peugeot and Alfa Romeo, have gone into full production with SoundHound Chat AI. Additionally, the company signed a contract with an unnamed U.S. electric vehicle manufacturer to integrate its assistant across its entire fleet. The bottom line? SoundHound's massive order backlog of $723 million provides excellent revenue visibility. As the company delivers on these contracts, it's poised for explosive top-line growth in the coming years.