I'm a dividend investor, so I could easily just say I wouldn't touch SoundHound AI (SOUN 4.11%) with a 10-foot pole because it doesn't pay a dividend.
However, there's actually more to the story than just that simple fact. Indeed, there are plenty of other reasons why investors should be leery of buying SoundHound AI even though its voice-based artificial intelligence (AI) services are quite interesting.
Here are a few for you to consider before you get caught up in the AI gold rush.
1. SoundHound AI doesn't make money
Thanks to my dividend focus, I don't own many tech stocks. However, I do own International Business Machines and Texas Instruments. They both have long streaks of annual dividend increases. And I bought them each while their dividend yields were historically high.
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There's something else they both have, however, and that's earnings. They are established and substantial businesses that are highly profitable. SoundHound AI isn't profitable, and there's no telling when it will be, given the capital investment arms race taking shape in the artificial intelligence space.
2. AI is all the rage
Emotionally driven investors often take exciting investment themes and run with them way too far. Artificial intelligence is likely to change the world, but not every AI stock will be a winner. It is way too soon to know which companies will end up being the Googles and which will end up being the Yahoo!s. I'm not willing to risk finding out that SoundHound's technology is outshone by a competitor's offering.
NASDAQ: SOUN
Key Data Points
3. That stock price chart is shocking
To be fair, SoundHound AI is likely to interest more aggressive investors than me. But it would still require a massive risk tolerance to own this stock. In the past year alone, it has lost 50% of its value twice. That's not unusual for a start-up business, but that's a roller-coaster ride that most investors, myself included, probably couldn't stomach.
AI could be the next dot-com
Unless you have a very strong belief that SoundHound is going to be a long-term winner in the AI space, you should probably watch this stock from the sidelines. Money-losing start-ups that are still spending heavily to build their businesses in emerging, competitive sectors are not usually the kinds of stocks that most investors should buy. The volatile stock price highlights that fact.
If you want exposure to AI, it might be a better choice to buy an AI-focused exchange-traded fund (ETF) to diversify your bet on this still-emerging technology.
