Euphoria surrounding artificial intelligence (AI) is fueling the capital markets. The S&P 500 and Nasdaq Composite are hovering near record levels as megacap tech companies continue to benefit from AI tailwinds.
At the center of the artificial intelligence (AI) narrative is chipmaker Nvidia (NVDA +0.47%). Demand for the company's graphics processing units (GPUs) and data-center services is off the charts. As a result, Nvidia's revenue and profits are accelerating at unprecedented levels.
The company is investing in several different areas of AI, and one in particular is garnering a lot of attention. Nvidia is an investor in speech-recognition platform SoundHound AI (SOUN 0.38%).
Let's dig into this partnership and learn why voice-recognition software is on Nvidia's radar. More importantly, let's assess the opportunities to invest in this budding area of the AI realm.
NASDAQ: NVDA
Key Data Points
Voice-recognition is a huge market
You may not realize it, but there's a pretty good chance that you interact with voice-recognition software on a daily basis. Apple has integrated the technology across its hardware devices through Siri. Moreover, both Amazon and Alphabet leverage speech AI applications across their respective lines of smart home appliances.
Market research suggests that by next decade the market size for voice-recognition technology could reach $50 billion. Given its big-tech peers already have an established presence in the AI-powered voice market, coupled with the technology's growth potential, it's not surprising to see Nvidia enter the scene.
Image source: Getty Images.
Nvidia's investment spurred a lot of interest
Investors learned that Nvidia is an investor in SoundHound AI earlier this year, following a 13F filing by the chipmaker. This caused SoundHound AI stock to surge -- with shares rising from penny-stock levels to as high as $8.91 per share.
While this was fun to witness, details surrounding Nvidia's relationship with SoundHound AI were sparse. But following Nvidia's GPU Technology Conference (GTC) in late March, investors finally learned a bit more about the partnership.
Nvidia's Drive infrastructure helps car manufacturers collect data loads that are needed to refine autonomous-driving technology. Given SoundHound AI's existing portfolio of work with Stellantis, Hyundai, Kia, and Honda, there is some obvious overlap between the company and Nvidia's technology.
SoundHound AI will be offering a voice assistant that runs on Nvidia's Drive for its automobile customers. This is a unique generative AI feature that provides drivers the ability to ask questions related to maintenance, safety, car settings, among other things.
Investors should assess different opportunities
SoundHound AI's partnership with Nvidia is exciting. But the company needs to prove that the relationship with Nvidia can be translated into tangible growth. Given the abnormal surge in the stock, I'd caution investors from buying SoundHound AI stock at its current valuation.
Moreover, SoundHound AI is far from the only company leveraging Nvidia Drive. During GTC, investors learned that Li Auto, Nio, Lenovo, and others are implementing Drive and other sibling AI services developed by Nvidia.
While Nvidia is best known for its chip business, the company is proving that it can disrupt areas beyond AI-powered hardware. I see the investment in SoundHound AI as one of many opportunities Nvidia is exploring to generate growth in its under-the-radar software business, all while playing an integral role in autonomous driving, which very well may be the next frontier of the automobile industry.
While SoundHound AI may appear as a lucrative opportunity, the company still has a lot to prove. By contrast, I think Nvidia is the engine powering myriad applications in the AI realm right now. For this reason, I see the stock as a compelling choice for long-term investors.
