Generative artificial intelligence (AI) has been one of the most impactful tech megatrends of our time. But so far, most of the hottest consumer-facing companies (such as ChatGPT maker OpenAI) are privately owned, which makes it difficult for retail investors to tap into the growth.
SoundHound AI (SOUN 6.17%) could change the narrative as it explores the synergies between generative AI and older technologies like speech recognition. Shares have already risen 250% over the last 12 months.
Why is SoundHound getting attention?
SoundHound's rise to mainstream attention began in early 2025 when Nvidia announced a $3.7 million stake in the audio AI specialist. The chipmaker had already exited its position by late 2024, but the disclosure was enough to make the market start paying attention.
Speech recognition and large language models (LLMs) are a natural pairing, each amplifying the other's strengths while compensating for their weaknesses. Together, these technologies allow AI platforms to become truly lifelike as they engage with users through natural speech instead of text-based prompts.
SoundHound has had its early successes with arguably low-hanging fruit like restaurant drive-thrus and automobile voice controls, but the long-term speech AI opportunity could include transformational products like humanoid robots.
NASDAQ: SOUN
Key Data Points
In the meantime, SoundHound has already secured a bevy of partnerships with mainstream brands like automakers Stellantis and Mercedes, which have used its technology to create hands-free voice assistants. The company is also working with restaurant brands, including Krispy Kreme and Red Lobster, to power drive-thrus and phone ordering. For investors, these deals serve as a vote of confidence in the technology underpinning the company's business model.
What do the numbers look like?
SoundHound is enjoying some exciting headlines. But before considering a position in the stock, it can pay to look at the numbers. Hype is temporary, and the company's long-term success will depend on how well it translates these high-profile deals into revenue and profits. The good news is that second-quarter earnings were downright explosive.
Revenue more than tripled year over year to $42.7 million, driven by strength in the company's core automotive and restaurant businesses, as well as the success of recently acquired subsidiary Amelia, an enterprise AI specialist. That deal dramatically expanded SoundHound's client list and gave it a presence in more business verticals. According to management, the company now serves 7 of the 10 top global financial institutions and is pushing into regional banks and credit unions.
Image source: Getty Images.
On the surface, these results look phenomenal. But investors should be cautious of companies that pursue an acquisition-heavy "roll up" strategy. While frequent acquisitions can drive rapid short-term growth, they don't always drive shareholder value.
Successful acquisitions are challenging because strong, profitable businesses typically command premium prices. Acquiring weaker or unprofitable ones may appear inexpensive, but it can strain the parent company's balance sheet by increasing cash burn.
SoundHound's second-quarter operating loss actually grew by 255% to $78.1 million. If these losses remain constant over the next four months, the company faces an annualized cash burn of $312.4 million compared to cash and equivalents of just $230.3 million on its balance sheet.
Where will SoundHound stock be in 5 years?
Over the next five years, SoundHound looks positioned to build an exciting niche for itself in global speech AI. Its long list of mainstream partnerships suggests it has already established an early economic moat that will likely grow deeper over time as its technology improves and it benefits from more economies of scale. That said, the company's losses are growing faster than its revenue, which means the current rally is driven more by speculation than substance.
Today's investors have a choice. Either bet on speculative AI stocks with great potential but weak fundamentals, or miss out on some of the hype-driven rallies as you wait for the dust to settle and the numbers to make a little more sense.
