What is the hottest artificial intelligence (AI) stock on the market right now? You might think it is NVIDIA (NASDAQ: NVDA). After all, the chipmaking giant recently reported spectacular fourth-quarter results and predicted that strong growth will continue.
But there’s at least one other AI stock that’s outperforming Nvidia so far in 2024: SoundHound AI (NASDAQ: SOUND). Shares of the leader in conversational AI are up more than 80% so far this year. The company is scheduled to report its fourth-quarter results later this week.
Should you buy SoundHound AI stock before Thursday’s big announcement? Nvidia has it.
Nvidia’s AI buying spree
SoundHound AI shareholders can thank Nvidia for the huge profit so far this year. The stock was floundering until Nvidia filed its 13F-HR filing with the U.S. Securities and Exchange Commission on Feb. 14. That filing revealed that Nvidia had purchased more than 1.73 million shares of SoundHound AI.
Without a doubt, Nvidia’s investment in SoundHound represented pocket change for the enormous GPU maker. There were also four other AI stocks included in the regulatory filing, two of which were much larger buys for Nvidia. However, many investors saw Nvidia’s initiation of a position in SoundHound AI as something of an endorsem*nt of the small company.
This wasn’t the first time Nvidia invested in SoundHound AI. In 2017, Nvidia, along with several other investors, funded a $75 million capital raise for the small company while it was still privately held.
Why SoundHound AI is intriguing
I think SoundHound AI is certainly an intriguing company. It has built an impressive customer base in recent years thanks to voice AI technology, which is arguably the best available.
SoundHound AI has been especially successful in the automotive industry. A “who’s who” of automakers uses its AI platform, including sling, hyundaiKia and the stellantis automobile family (Alfa Romeo, Chrysler, Citroen, Dodge, Fiat, Jeep, Opel and Peugeot).
The company has also made significant progress in the restaurant market. Its partners include Beef O’Brady’s, Krispy KremeOracle Food and Beverages, Toastand White Castle.
SoundHound estimates its total addressable market to be more than $160 billion. In addition to automotive and restaurant applications, the company is actively pursuing opportunities in the entertainment and Internet of Things markets. It also hopes to target financial services, healthcare, retail and more.
The company is growing by leaps and bounds. In Q3 2023, SoundHound AI’s revenue soared 19% year over year and 52% sequentially. It also achieved a strong gross margin of 73%.
Should You Buy SoundHound AI Stock Before Thursday?
SoundHound provided a wide range of fourth-quarter revenue guidance in November of between $16 million and $20 million. The company also expects to generate positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter. If SoundHound beats the average analyst estimate of $17.75 million and hits its EBITDA target, its stock could take off.
So, should you buy SoundHound AI stock ahead of the company’s fourth-quarter update on Thursday? I wouldn’t go that far. Struggling to buy SoundHound AI quickly in an attempt to make a big profit with better-than-expected quarterly results is a gamble.
On the other hand, SoundHound has a big long-term opportunity with its voice AI technology. Continues to generate solid growth. If you’re an aggressive investor looking for an AI stock that’s still small, I think SoundHound AI deserves a serious look.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Nvidia and Toast. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
Should you buy SoundHound AI stock before Thursday’s big announcement? Nvidia has it. was originally published by The Motley Fool
