There's no shortage of artificial intelligence (AI) stocks, from AI-powered defense systems to agentic AI platforms and more.
One of the most unique AI pure plays, though, is SoundHound AI (SOUN 4.11%), which is developing a voice AI platform that fuses large language model (LLM) AI and audio recognition technology into a customer service AI agent barely distinguishable from a human (at least, that's the idea).
It's a worthy goal, but there are some big hurdles standing in SoundHound's way. So big, in fact, that you may want to forget SoundHound AI and opt instead for a colossus AI stock that truly owns its data. Here's why.
Image source: Getty Images.
SoundHound's opportunity
If you've ever interacted with a prerecorded voice menu system, you know how frustrating automated customer service interactions can be. They leave most of us just pressing the buttons we hope will get us to a real person. In other words, SoundHound has identified a real need for a system that can actually understand what a caller wants and provide answers in natural-sounding, conversational speech.
One of the challenges SoundHound's AI system seems to have successfully overcome is recognizing voices when there's lots of background noise. As a result, restaurants like White Castle have deployed its systems to speed up drive-thru ordering. SoundHound claims its restaurant voice ordering platform is 32% more accurate than human employees, provides 85% faster service times, and offers cost savings of $58,000 per location per year. The company has parlayed this restaurant technology into phone ordering for Five Guys and Red Lobster.
But to really jump-start its growth, SoundHound needs to expand beyond restaurant ordering into customer service lines of all types. The company's Amelia 7 AI customer service agent has already been picked up by some companies, largely in the insurance and financial sectors, but there's obviously a huge untapped market for similar AI agents from businesses of all types.
Image source: Getty Images.
Outside the niche
The problem for SoundHound is that none of the individual technologies it's using are new or unique. AI voice assistants like Apple's Siri, voice recognition software, and LLM-powered AI chatbots are everywhere and consistently improving in quality. To succeed, SoundHound will have to hope that another company with an edge in one of these areas doesn't offer a competing product, because it doesn't have much of a moat.
That puts SoundHound on a bit of a time crunch to develop a cross-industry agentic voice AI that's roughly as capable as a human operator. That means it must understand what the customer wants, reliably provide accurate information and solutions, and above all, not take too long to generate a response. That's pretty easy for restaurant ordering, which involves a set list of menu items. It's pretty difficult for a generic help line where there are any number of possible issues a customer might bring up.
And where is SoundHound going to get customer interaction data to train its AI? It seems unlikely that even millions of restaurant order transcripts could adequately train an agentic AI on how to address, say, a question about why a car engine is making a funny noise.
That potential lack of AI training data seems like a big long-term problem for SoundHound. It probably can't afford to pay a third party for LLM access, since it's already unprofitable and cash-flow-negative, and has been relying on costly acquisitions for growth. The company's share count has more than doubled over the last three years as it has diluted existing shares to raise capital.
NASDAQ: SOUN
Key Data Points
All that makes me very wary of SoundHound's long-term prospects. Luckily, there is a stock you can buy that actually does own all the AI data it needs, and then some.
Alexa, what stock should I buy?
Yep, that company is Amazon (AMZN 1.52%). The e-commerce titan was a pioneer in the voice assistant space with its Alexa chatbot. The company also has plenty of AI experience, continually integrating AI features into its Amazon Web Services cloud platform.
Last year, Amazon debuted the AI-enhanced Alexa+. In doing so, it also changed its privacy policy, forcing all users to allow their conversations with Alexa to be uploaded to the cloud for analysis and potential AI training. In Amazon's defense, it would be practically impossible to offer an AI-powered voice assistant without allowing user queries to be processed in the cloud, given AI's massive data usage requirements.
Image source: Amazon.
That means that Amazon now owns a vast trove of AI voice assistant training data, which -- according to some users -- has already made Alexa+ able to respond more quickly and accurately to queries. In other words, Amazon already owns an agentic voice AI, the means to train it on all manner of queries, voice recognition software, a cloud platform on which those queries can be processed, and a boatload of cash at its disposal to pursue whatever opportunities it wants.
True, Amazon hasn't indicated any plans to get into the AI chatbot business anytime soon, but it could easily do so at pretty much any time using already-developed resources it has at the ready. That should strike fear into the heart of any SoundHound investor.
