SoundHound AI Soars 90% - Time to Buy or Time to Bail?

Voice AI specialist SoundHound erupts with staggering 90% gains—igniting investor frenzy.

The Speech Revolution Accelerates

SoundHound's proprietary technology bypasses traditional voice recognition limitations. Its edge computing architecture processes natural language faster than cloud-dependent competitors. The platform cuts through accent variations and background noise with eerie precision.

Market Forces Collide

Restaurant drive-thrus and smart home devices drive adoption. Automotive voice interfaces represent the next frontier. But hyperscalers loom large—Amazon's Alexa and Google Assistant dominate home ecosystems.

Financial Reality Check

That 90% surge looks impressive until you realize most analysts can't differentiate between actual revenue and venture capital fairy dust. The company burns cash faster than a crypto trader during a bull market.

Speculative investors chase the momentum while institutional money watches from the sidelines. SoundHound either becomes the next AI infrastructure pillar or another cautionary tale in the tech graveyard.

Image source: Getty Images.

Natural conversations with AI

So first, let's consider the SoundHound story. The company has developed a technology that allows AI to engage in natural and complex conversations with you -- whether it's taking your order at a restaurant or helping you make a medical appointment.

Its innovations transform speech directly into meaning -- bypassing the traditional step of translating speech into text -- which results in a quality experience that can be implemented across industries. More than 190 patents protect the company's technology, and about 110 more are pending.

All of this has resulted in customers in multiple industries -- including automaking, financial services, and healthcare -- signing on for its voice-recognition expertise. In the recent quarter, the company listed a few of its newest clients, like the restaurant chain Red Lobster and healthcare company Primary Health Solutions. And it says seven of the top 10 financial institutions worldwide use its platform.

This has fueled enormous growth, with revenue surging 217% in the latest quarter to a record high of more than $42 million. With this momentum, SoundHound AI raised its guidance for full-year revenue to the range of $160 million to $178 million. That's up from the previous forecast of $157 million to $177 million.

The challenge of profitability

The story sounds very bright so far, but the biggest challenge for the company is reaching profitability. In spite of sales roaring higher, SoundHound still hasn't made it to that milestone -- not shocking considering it has invested in technology and expanding its business.

In the latest earnings call, management addressed the subject, saying, "We are moving toward profitability and we see that in the near-term horizon." The company says it's controlling costs and optimizing its workforce through AI as part of the effort, and it aims to reach adjusted profitability based on earnings before interest, taxes, depreciation, and amortization (EBITDA) around the end of this year.

Meanwhile, as mentioned, SoundHound stock has skyrocketed over the past few months, so from this level, you may be wondering if there's any more room for growth. Though the stock has made significant gains, it still is down from its highest level, falling about 25% from a peak reached last December.

A $140 billion market

After the stock's recent top performance, it may not continue at the same pace in the weeks to come, but there's reason to be optimistic over the long term. We're still in the early days of SoundHound's growth story, with the total addressable market for voice AI at $140 billion.

So the company still has plenty of territory to conquer, and the quality of its voice AI may help it stand out from the crowd. In the NEAR term, progress on profitability goals may serve as a catalyst for the stock. For example, if SoundHound ends the year with adjusted EBITDA profitability, investors may applaud that and scoop up the stock.

Should you buy the stock after its recent big gains? If you're a cautious investor, you may want to wait to see if the company will reach this initial profitability goal -- you may feel more comfortable investing at that point, as it attains a significant milestone. But if you don't mind a bit of risk, you might choose to get in on SoundHound now and potentially benefit throughout the stages of this growth story.

Most importantly, whether SoundHound AI soars in the weeks to come or not, it is well positioned to succeed in the voice AI market over the long run -- and that's great news for investors who aim to hold on to the shares for a number of years.