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When investors think about high-flying artificial intelligence (AI) stocks, Nvidia or Palantir Technologies probably come immediately to mind. While both of those AI stocks indeed delivered huge returns in 2024, they lagged well behind an even bigger winner.
Soundhound AI's (NASDAQ: SOUN) share price skyrocketed 836% higher last year. However, the stock has pulled back more than 40% from its high with Soundhound's market cap hovering around $5 billion. Could buying Soundhound AI stock today set you up for life?
What Soundhound AI does
While Nvidia is practically a household name now and Palantir has garnered significant publicity, many investors might not know much about Soundhound AI. The company was founded in 2005 with a goal to enable people to "talk to technology just as they do to each other."
Two decades later, Soundhound AI is fulfilling that goal. The company's voice AI technology is used by organizations in multiple industries, including automotive, hospitality, and restaurants.
Soundhound's customer base features a "who's who" in those industries. For example, automotive companies using Soundhound's technology include Hyundai, Kia, and Stellantis' brands Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Maserati, Opel, Peugeot, and Ram. Restaurants using Soundhound's products include Applebee's, Chipotle Mexican Grill, Five Guys, and Jersey Mike's.
The company has won 155 patents for its technology and has 115 patents pending. This intellectual property protection spans areas including machine learning, natural language understanding, and speech recognition.
A massive opportunity for voice AI
Soundhound AI's revenue has increased by a compound annual growth rate of 51% since 2020. Its momentum is accelerating. In the third quarter of 2024, the company's revenue soared 89% year over year to $25.1 million.
Importantly, Soundhound continues to diversify its customer base. In Q3 of 2023, over 90% of its revenue stemmed from the automotive sector with 72% from one customer. Today, six sectors each contribute revenue of between 5% and 25% with the largest customer making up only 12% of total revenue.
Soundhound's success so far could be just the tip of the iceberg. The company estimates a total addressable market of at least $140 billion. This addressable market could grow even larger over the next few years. Juniper Research projects the market for voice AI will top $160 billion by 2026.
The explosion of Internet of Things (IoT) devices could create an especially big opportunity for Soundhound AI. An estimated 75.4 billion IoT devices will be connected globally this year. Soundhound believes these many of these devices are ideally suited to benefit from its voice AI technology.