Looking for stocks that can deliver life-changing returns means looking for stocks that have massive upside potential. While purchasing a big tech company that has a strong outlook could be a recipe to outperform the market over the next decade, to achieve life-changing returns, you must consider stocks that are fairly small.
It's far easier to grow from a small company to a larger one than it is for a large company to grow into a behemoth, and looking for stocks at under a $10 billion market cap is a great place to start. SoundHound AI (SOUN +0.13%) is one company that investors think could produce life-changing returns. It has a market cap of about $5 billion and is operating in a nearly endless application of artificial intelligence (AI).
SoundHound AI checks a few of the boxes for what could become an incredible investment, but how close to guaranteed success is the investment?
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SoundHound AI's future isn't in its own hands
To achieve greater returns, you must take on more risk. That's a basic investing principle, and it's why you can achieve a greater return in the stock market than you can by placing your money in a savings account. However, there's a limit to how much risk investors should take, and they must keep that in mind with SoundHound AI.
SoundHound AI is operating in an emerging corner of the AI sector. It should be considered an AI application investment, as it's bringing AI technology to its clientele to deploy. SoundHound AI combines audio recognition technology with generative AI to produce AI agents that can replace humans in interactions that aren't usually done face-to-face.
One of the biggest areas SoundHound AI's software has been deployed is in restaurant drive-thrus, but there are endless other applications. Perhaps the biggest one is in customer service-heavy industries, such as financial services, insurance, and healthcare. All three of those fields employ thousands of customer service agents, and SoundHound AI's software could replace them.
NASDAQ: SOUN
Key Data Points
However, SoundHound AI's success may be out of its hands. Automated customer service agents that most consumers know are rather poor. They work their way through a decision tree and don't sound human at all.
SoundHound AI's product must be flexible, sound human-like, and offer as good, if not better, customer service than its counterparts. If it can achieve that, SoundHound AI's product should be accepted by the public. If the consumer rejects this integration, then money spent on deploying SoundHound AI's product in call centers will be wasted, as customers will just ask to talk to an actual human.
We're in the early innings of SoundHound AI's software being deployed, so the verdict is still out on its success. However, it's attracting several clients to try it.
SoundHound AI is putting up huge growth figures
In Q3, SoundHound AI's revenue rose 68% year over year to $42 million. It also announced several restaurants that had purchased its product for drive-thru automation and that three of the top 10 global financial service institutions had purchased additional capabilities. That's about as successful as investors can ask SoundHound AI to be, and monitoring its growth rates to ensure continued success is key.
Last quarter, management told investors they could expect 50% organic growth for the foreseeable future. If this bold claim pans out, then SoundHound AI can deliver monster returns over the next decade. On the flip side, if consumers reject the product, this growth rate could tumble, as it would be a product that doesn't provide any value to its clients.
As a result, SoundHound AI is a high-risk, high-reward stock. I think the risk is worth the reward, as SoundHound AI has the potential to become a key part of AI adoption if its product is done right.
