SoundHound AI (NASDAQ: SOUN), a developer of audio and speech recognition technologies, went public by merging with a special purpose acquisition company (SPAC) on April 28, 2022. Its stock started trading at $8.72 per share, and it rallied to an all-time high of $24.23 on Dec. 26, 2024, as its market capitalization reached nearly $9 billion.
SoundHound initially impressed the bulls with its breakneck growth rates. Its revenue surged 47% in 2022, 47% in 2023, and 85% in 2024. That acceleration was driven by the growing usage of its Houndify platform to develop custom speech recognition tools, as well as its acquisitions of restaurant AI company Synq3, online food ordering platform Allset, and conversational AI company Amelia. Nvidia(NASDAQ: NVDA) also bought more shares of SoundHound in early 2024, pumping up investor optimism.
Image source: Getty Images.
But today, SoundHound's stock trades at about $8. Its stock pulled back as investors fretted over its ongoing losses, cooling organic growth, and growing dependence on acquisitions. Its high valuations also made it an easy target for the bears as the Donald Trump's unpredictable tariffs drove investors toward safe haven plays again.
Nvidia liquidated its entire stake in SoundHound earlier this year, and SoundHound delayed its 10-K filing for 2024 in March due to the "complexity" of its acquisitions of Synq3 and Amelia. Those setbacks caused its stock to plummet, but it doesn't look like a bargain yet. With a market cap of $3.28 billion, it still trades at 20 times this year's sales estimaes.
Analysts expect its revenue to surge 96% in 2025, but a lot of that growth will come from its recent acquisitions. In 2026, they expect just 29% growth -- and it's expected to stay unprofitable for the foreseeable future.
Therefore, I believe SoundHound's stock could either stagnate or slide lower over the next 12 months. So instead of buying SoundHound as a contarian play at these levels, investors should pay attention to two less valuable AI plays that ich might eclipse its market cap in a year: Innodata(NASDAQ: INOD) and Five9(NASDAQ: FIVN).
Innodata was once a tiny, slow-growth analytics software company that didn't attract much attention. But in 2018, it rolled out a suite of task-specific microservices aimed at preparing data for AI applications. When big tech companies develop a new AI project, they often spend 80% of their time preparing that data and the remaining 20% feeding it into the training algorithm.
It makes sense to outsource all that time-consuming process to Innodata's microservices. As of this writing, five of the "Magnificent Seven" companies had already hired Innodata to clean up their AI data.
From 2019 to 2024, Innodata's revenue grew at a compound annual growth rate (CAGR) of 25%. In 2024, its revenue surged 95% and it turned profitable on a generally accepted accounting principles (GAAP) basis. That growth spurt was driven by its new Magnificent Seven contracts and the rapid expansion of the generative AI market.
Five9 operates a cloud-based contact center, which helps companies manage and optimize customer interactions across voice, chat, email, web, social media, and mobile channels with AI-powered chatbots and human agents. Its customers can directly access those services or integrate them into their own apps with a few lines of code. It aims to disrupt traditional call centers with those streamlined services.
From 2019 to 2024, Five9's revenue grew at a CAGR of 26%. It also significantly narrowed its GAAP net losses in 2023 and 2024. That growth was driven by the ongoing outsourcing and automation of customer service jobs to cut costs.
Both stocks look undervalued relative to their growth potential
With a market cap of $1.16 billion, Innodata trades at only 4.8 times this year's sales. Five9, which has a market cap of $1.75 billion, trades at 1.5 times this year's sales.
From 2024 to 2026, analysts expect Innodata's revenue to grow at a CAGR of 31% as Five9's revenue increases at a CAGR of 10%. Innodata's business of cleaning up AI data might be better insulated from the macro headwinds than Five9, which could struggle to gain new customers during an economic downturn. But over the long term, Five9 should keep expanding as more companies automate their call centers and adopt its AI chatbots.
Assuming Innodata matches analysts' estimates and trades at a more generous 12 times its forward sales by the beginning of 2026, its stock could more than triple to nearly $105 a share and boost its market cap to $3.51 billion.
If Five9 meets Wall Street's expectations and commands a higher (but still reasonable) forward price-to-sales ratio of 5 by the start of 2026, its stock price could nearly quadruple to around $82 and propel its market cap to $6.34 billion.
Investors should take those estimates with a grain of salt, but both of these AI stocks have a shot at overtaking SoundHound AI over the next 12 months. I think they will. Meanwhile, SoundHound AI's stock could stall out and slide lower if it doesn't fix its most pressing issues.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Five9 and Nvidia. The Motley Fool has a disclosure policy.
