In 2023, the investing landscape was thrown into a frenzy by the surge of artificial intelligence (AI) fervor. According to Precedence Research, the AI market was projected to achieve a staggering $2.6 trillion value by 2032, growing at a compound annual rate of 19%. This exponential growth trajectory has sparked excitement across industries set to benefit from this technological revolution.
While tech giants like Nvidia (NVDA), Amazon (AMZN), and Microsoft (MSFT) garner attention as top AI stocks, smaller players like SoundHound AI (SOUN) are making waves in this space and poised for substantial growth.
Only two months into the year, the stock of SoundHound AI has skyrocketed by a remarkable 211%, vastly outpacing the modest 7.9% gain of the S&P 500 Index. This meteoric rise was fueled by chip giant Nvidia’s expressed interest in the emerging AI company and SoundHound AI’s robust Q4 2023 financial report released on Feb. 29.
While AI stocks present undeniable allure, diversification remains key for long-term portfolio success. Kosmos Energy (KOS), priced around $6 per share, emerges as a solid growth stock candidate, benefitting from promising prospects in the energy sector underscored by its recent robust Q4 performance.
Delving deeper, we explore the reasons behind Wall Street’s strong buy rating on these two compelling stocks.
SoundHound AI Stock Overview
Boasting a $1.8 billion market capitalization, SoundHound AI specializes in providing voice AI solutions, enhancing businesses’ ability to deliver premium conversational experiences to consumers. The company’s robust AI offerings continue to bolster its fundamental strengths.
In its 13F filing on Feb. 14, Nvidia unveiled a significant $3.7 million investment in SoundHound AI. Given Nvidia’s prominence in the AI domain, this financial commitment piqued investor interest, catalyzing the notable surge in SoundHound AI’s stock price.
The most recent fourth-quarter financial report showcased an impressive 80% year-on-year revenue surge at SoundHound AI, totaling $17.1 million. Notably, the company’s cumulative subscriptions and bookings backlog, revenue earmarked for future recognition, doubled to $661 million compared to the previous year.
Although SoundHound AI is currently operating at a loss, efforts are underway to ameliorate its GAAP net losses, reducing it to $0.07 in Q4 from $0.15 in the corresponding period of the prior year.
Management at SoundHound AI maintains an optimistic outlook for the future, anticipating a revenue projection of approximately $70 million in 2024. Further, the company aims to achieve positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 2025, potentially surpassing $100 million in revenue.
Introducing innovative products in 2023, including offerings like Smart Answering, Employee Assist for restaurants, and SoundHound Chat AI for Automotive, SoundHound is poised for exponential growth in the forthcoming years, edging closer to profitability. The company closed the quarter with $95.3 million in cash and cash equivalents.
Analysts forecast a 49% year-on-year revenue upsurge to $69.3 million for SoundHound in 2024. Additionally, losses are expected to narrow to $0.25 per share compared to the 2023 figure of $0.40. While SoundHound’s long-term potential shines brightly, investors must exercise prudence given the company’s present profitability status.