Many of the biggest companies in the world right now attained their gargantuan size due to their exposure to AI. From the developers of AI applications to the suppliers of critical AI components, nearly every company related to artificial intelligence saw its valuation soar in 2024.
So far this year, however, many of those valuations have taken a price cut. If you've been looking to add massive growth potential to your portfolio by investing in AI stocks, now looks like your best chance in months.
NASDAQ: SOUN
Key Data Points
This tiny AI stock has huge growth potential
Most investors haven't heard of SoundHound AI (SOUN 2.42%). But this relatively small AI business is growing fast, and -- at least on paper -- it has significantly more growth upside potential than its larger peers.
What exactly does SoundHound do? Its business model is revealed in its name. SoundHound specializes in bringing AI to sound applications -- everything from talking with your car about road conditions to ordering fast food at your favorite burger franchise. Any aspect of daily life that deals with sound -- primarily anything to do with voice communication -- is theoretically within SoundCloud's domain.
Here are a few examples that are already being piloted by SoundCloud customers. Companies like Applebee's and White Castle are testing SoundHound's voice platform, which captures and parses real-time voice commands, for phone and drive-thru orders. Dodge and Kia are using its platform to allow drivers to chat with their cars about maintenance and navigation. Planet Fitness is using SoundHound to help with customer service calls. Several banks and insurers are using it to automate claims processes and customer notification needs.
SoundHound believes its total addressable market to be around $140 billion. That's an attractive number, given that the company's total market cap is now under $4 billion. While there is heavy competition from big tech companies that are typically better financed, SoundHound benefits greatly from its early commercialization efforts. That has given its technology plenty of industry validation, as well as real-world data to better train its models.
Big tech companies and their commensurately large research and development budgets will likely outpace SoundHound's technological capabilities over time. But that still leaves plenty of room for SoundHound to grow, especially in more niche areas that are ignored by its larger competitors focused on bigger opportunities. SoundHound's diminutive size also makes it an attractive buyout candidate should it achieve any technological breakthroughs that big tech covets.
But even if SoundHound faces competitive pressures over the long term, the recent pullback in AI stocks might have created a near-term buying opportunity that's too good to pass up.
Could SoundHound stock double in 2025?
It's not hard to see how SoundHound stock could double in price this year. Before the dip, shares were nearly three times higher than today's share price. The drop wasn't due to lower sales growth, but to a reduction in the company's price-to-sales multiple. In short, the market simply decided to pay less for SoundHound's growth.
Here's the thing. In 2025, analysts expect the company to grow sales by 97%. That's more than 10% higher than 2024's estimates. In summary, SoundHound's growth trajectory remains intact. If you believe the AI fervor will heat up once again following the latest pullback, this is your chance to buy into a relatively small AI business that's still growing like a weed, all at a deep discount to last year's closing stock price.
