SoundHound AI (SOUN -1.94%) is one of the most popular pure-play artificial intelligence (AI) investment options available today. Most companies in the AI race have other businesses that hinder them from growing solely from AI, but not SoundHound AI.
SoundHound AI has put up incredible growth figures over the past few quarters, and is expected to do so for the rest of the year. But can it turn $10,000 into $1 million? Let's find out.
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SoundHound AI's platform is seeing huge demand
SoundHound AI does exactly what it sounds like: It integrates audio with AI. It's primarily doing this with AI agents that are better at recognizing audio inputs than any other platform out there. AI platforms that are triggered by audio inputs are nothing new (think Siri or Alexa), but their execution hasn't changed since these products were launched a decade ago.
SoundHound AI's platform is far superior to those products. It has been used in areas like car digital assistants, restaurant drive-thrus, and automating customer service platforms in the healthcare and financial industries. The uses are nearly limitless, as anywhere where humans currently interact with each other in a fairly regular pattern is a potential target for SoundHound AI's automation.
The demand for SoundHound's product has been incredible, with revenue rising 151% in its last quarter to $29 million and projected to increase about 97% to $167 million for 2025. Those are strong growth figures. They back up the claim that SoundHound AI may be able to deliver returns strong enough to transform $10,000 into $1 million, but it's going to need more than just 2025 growth to accomplish that.
At the end of 2024, management said that its revenue backlog was nearly $1.2 billion. While this revenue will be recognized over several years, it's still a massive increase from today's totals, and combined with new business wins, it will provide excellent growth.
But will it be enough?
SoundHound would need to become a software giant to achieve these returns
For SoundHound AI to turn $10,000 into $1 million, the stock needs to rise 100-fold. That means SoundHound would have to rise from its current $4.3 billion market cap to $430 billion. There aren't many stocks in that valuation range, so SoundHound AI would have to dominate its industry. But if its technology can deliver automation across the customer service industry, it could provide unparalleled value to its clients, leading to massive sales growth.
Still, SoundHound AI has one hurdle it must overcome: Valuation. SoundHound AI's stock isn't cheap, trading at 39 times sales.
SOUN PS Ratio data by YCharts.
That's expensive, considering that most software companies trade between 10 and 20 times sales. Then again, most software companies aren't doubling their revenue year over year.
If we place SoundHound AI on the high end of that valuation range (20 times sales) with a $430 billion valuation, that means it must produce $21.5 billion in annual revenue to deliver 100 times returns.
That would place SoundHound at a similar revenue level to Adobe (NASDAQ: ADBE), another software giant. Is this possible? Absolutely. Is it probable? Likely not.
SoundHound AI needs to keep up its rapid growth to achieve these kinds of returns, and only time will tell if that's feasible or not. Still, even if it doesn't deliver 100x returns, it may be a successful stock, which could make it a great buy today. There's still a significant risk associated with SoundHound's stock, but if investors maintain a small position size, this risk can be mitigated in a well-diversified portfolio.
