Week to date, shares of speech recognition specialist SoundHound AI (SOUN 5.77%) were up 53% as of 12 p.m. ET on Thursday, according to data provided by S&P Global Market Intelligence. The stock soared after Nvidia revealed late Wednesday that it owned a small stake in the company worth $3.7 million as of the end of December.
Why is Nvidia interested in SoundHound AI?
SoundHound AI is a small company with only $38 million in trailing revenue, but its speech recognition technology powered by artificial intelligence (AI) has been gaining adoption among several notable companies in the restaurant industry, including Jersey Mike's and White Castle. The company's revenue grew 19% year over year in 2023's third quarter.
The investment is consistent with Nvidia's recent interest in partnering with small tech start-ups doing big things in AI. Nvidia has two business segments, NVentures and Nvidia Inception, that are focused on identifying start-ups to form long-term partnerships. Nvidia made several corporate investments last year, including in cloud service provider CoreWeave and advanced AI model platform Hugging Face.
Nvidia's investment in SoundHound is also consistent with its interest in furthering the development of speech AI technology. Last year, it introduced the Nvidia Avatar Cloud Engine (ACE) for games that uses generative AI-powered voice technology to allow digital avatars to be more interactive and speak multiple languages.
Why buy SoundHound AI stock?
Even after the stock's jump, SoundHound shares are still down over the last year but trade at an expensive price-to-sales ratio of 19.4. The company isn't profitable yet, but analysts expect revenue to increase by 50% in 2024.
Speech is an area where AI will have a big impact, and Nvidia clearly believes that SoundHound will be successful in growing the adoption for its technology.
