SoundHound AI (SOUN 5.77%) stock has been all the rage lately. Its shares have soared over 50% in just the past week and more than tripled in the last month, despite a sharp sell-off after the release of its Q4 earnings report on Feb. 29. Some of the exuberance is tied to artificial intelligence (AI) leader Nvidia, which disclosed its own investment in SoundHound earlier this month.
But some of what's driving investors into SoundHound stock is the potential growth in the market for the specific voice AI solutions it offers. The company is in a position to benefit from generative AI and the immeasurable amount of use cases ChatGPT owner OpenAI has potentially unleashed.
Escalating AI market
SoundHound offers voice AI technology to its clients. For example, its addition to automobiles enables drivers to ask for navigation assistance to find specific locations, seek information about local sights, or get advice on things to do in the area.
The company recently said its platform will use a generative AI-enabled in-vehicle voice assistant for Stellantis vehicle owners. The market for voice recognition, whether in smart cars, home entertainment, or with businesses is set to explode this decade.
Data Source: Statista
Keep perspective
That fact alone doesn't mean SoundHound is a good stock to buy right now. In its recent earnings report, the company said it generated record revenue that jumped 80% year over year.
That marked a steep acceleration from the third quarter's 19% growth. Full-year 2023 revenue also grew 47%, but that amounted to just $46 million for the year. Following the volatile trading this year, the stock still sports a lofty price-to-sales (P/S) ratio of 34.
The company's guidance calls for revenue to reach $63 million to $77 million this year, before climbing to at least $100 million in 2025. That's solid growth, but looking two years out, it still leaves shares pricey at over 15 times sales.
