What happened

Shares of SoundHound AI (SOUN 15.46%) gained 157.1% in the first half of 2023, according to data from S&P Global Market Intelligence. Starting the year as a penny stock with microscopic revenue streams and big, long-term dreams, SoundHound quickly capitalized on the surging public interest in artificial intelligence (AI) solutions. The company's ambitions are even more hopeful nowadays despite its financial means staying slim.

So what

SoundHound has developed an AI-based voice-recognition platform, which it makes available to customers in several ways. The "three pillars" that constitute SoundHound's total revenue stream are technology-license royalties, subscription plans for its turnkey voice-control services, and ad-based monetization.

The company used to be known chiefly for its eponymous music-identification tool, similar to the popular Shazam app that Apple acquired for $400 million in 2018. Nowadays, SoundHound's target audience has moved from consumers to household-name enterprises. Its ecosystem of partners and clients include several leading payment systems, dozens of automakers, and consumer-facing software developers. So, if you've ever commanded your car or entertainment system using your voice, or interacted with a chatbot over the phone, you've likely encountered SoundHound's technology, albeit unknowingly.

That message is getting across to investors in 2023. I mean, the company is called SoundHound AI for a reason, highlighting the company's reliance on proprietary AI systems. The business is still fairly small, with annual sales adding up to just $31.1 million last year. But the top line started soaring even before ChatGPT came along to kick-start the AI boom. SoundHound's trailing revenues rose by 71% over the last four quarters.

Now what

An AI-powered, hyper-growth story is an easy sale in this market. However, it should be noted that SoundHound is operating with negative operating profits and cash flows, often keeping the lights on by raising cash in dilutive stock offerings. Furthermore, the stock isn't exactly blasting off to the moon right now. Including the stock market's inflation-inspired flight from risky investments in 2022, SoundHound's stock price is back almost exactly where it was 52 weeks ago. The chart barely kept up with the S&P 500's 16% gain over the same span:

So it's best to take a sober look at SoundHound's long-term business prospects before jumping on this bandwagon. I like the company's ability to land contracts with many market-leading brands but am less impressed by the limited money-making value of these deals. I don't mind waiting for a price correction before picking up shares in this company.

That said, I'll certainly keep an eye out for opportunities to buy SoundHound on the dips. If nothing else, this could be another big-ticket voice-control buyout in the making.