SoundHound AI (SOUN +3.57%) is one of the more popular artificial intelligence (AI) pure-play stocks. Its top-notch technology, combined with blistering growth and small size, could be an investor's ticket to making a massive return, should SoundHound's technology be widely adopted.
But can SoundHound AI transform a meager investment into $1 million? Let's find out.
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SoundHound AI's products can be used in multiple situations
The first thing to examine about a company when searching for stocks that could provide massive returns is a great technology that is only used in a niche situation right now, but could easily expand to be used by everyone, all the time. SoundHound AI's audio recognition platform meets that criteria.
SoundHound AI's technology is nothing new; we've had digital AI assistants like Alexa and Siri for some time, but these AI agents often misunderstand users and do the wrong thing. The same goes for digital assistants in cars. However, SoundHound AI's model is a better alternative, as there have been multiple instances where SoundHound AI's platform has outperformed its human counterparts.
NASDAQ: SOUN
Key Data Points
Currently, SoundHound AI's technology is being deployed in the automotive space (digital assistants in vehicles), restaurants (think automating drive-thru order taking or placing an order over the phone), healthcare, and financial industries, among others. Basically, if there's an opportunity to interact with a human not face-to-face, SoundHound AI's technology could be applicable.
This widespread use has shown up in SoundHound AI's financials, with Q1 revenue increasing 151% year over year to $29.1 million. It should be no surprise to investors that SoundHound AI is unprofitable, as it's still attempting to capture market share in an important and growing industry. So, if you're looking for profits, you'll have to check back in a few years.
Still, 151% growth is nothing short of impressive, and projected growth for FY 2025 is 97%. If it can deliver those kinds of returns quarter after quarter for multiple years, SoundHound AI could provide investors fantastic returns. But will they be enough to make you a millionaire?
SoundHound AI would need to become a massive business to make investors millionaires
If we use a $10,000 initial investment, SoundHound AI's shares would need to rise 100 times in value to reach $1 million. Today's $3.9 billion market cap would make it a $390 billion company if it increased 100 times in value.
That's a company nearly the same size as Costco is today, so SoundHound AI would need to become a giant to achieve 100 times returns. That's probably a bit unrealistic, but just because SoundHound AI won't provide 100 times returns doesn't mean it can't be a successful investment.
SoundHound's stock is quite expensive at 35.2 times sales. However, it's expected to undergo significant growth over the next year, which is why the forward price-to-sales (P/S) ratio is also useful.
SOUN PS Ratio data by YCharts
Most software companies trade between 10 and 20 times sales, with the best companies trading slightly above that range. However, if SoundHound AI can deliver a FY 2026 where revenue doubles again, today's stock price could look cheap. There's only about one year's worth of growth baked into SoundHound's stock price, so this could be a bullish sign for investors if they can deliver multiple years of market-crushing revenue growth.
While SoundHound AI may not be able to make you a millionaire by itself, it has the potential to be a successful stock pick if it can keep posting excellent results. Because of that, I think SoundHound AI is a decent stock to scoop up today. Still, it is a high-risk, high-reward business, so investors should keep their position sizing appropriately small in their portfolio.
