Why SoundHound AI Stock Soared Again Thursday

Why SoundHound AI Stock Soared Again Thursday

There haven’t been many stocks having as good a run as SoundHound AI (NASDAQ: SOUN) recently. Shares of the provider of artificial intelligence (AI)-driven sound recognition solutions have rocketed all week, and have nearly quadrupled in just the past month.

The company didn’t put out any news today, but the stock still continued its push higher. SoundHound shares had gained 14.7% as of 3:45 p.m. ET as investors are seeing the potential for yet more gains.

AI market size

The initial catalyst for the recent surge in SoundHound stock was news that AI juggernaut Nvidia has invested in the company. While the investment isn’t large, it shows that SoundHound’s focus on AI-driven voice solutions has a real place in the expanding AI market.

Just last week SoundHound confirmed that its voice assistant is integrating OpenAI’s ChatGPT to enhance the driver experience for automaker Stellantis’ customers. The combination of SoundHound’s software and AI technology opens up multiple uses for drivers to gain information and updates related to travel needs.

Today’s big jump is likely related to a strong quarterly earnings report last night and a major stock move for C3.ai today. That company beat analyst expectations and that just enhanced the excitement surrounding everything AI.

Fundamentals are still important

More and more companies are beginning to utilize the power of AI in multiple ways. But while Nvidia’s sales are growing exponentially to more than $20 billion per quarter, SoundHound AI only generated about $13 million in its last quarterly period.

That was more than a 50% jump sequentially from the previous quarter, so there is certainly accelerating growth for SoundHound as well. But unlike Nvidia, SoundHound isn’t yet profitable. On top of that, the stock has a price-to-sales (P/S) ratio of over 40.

Investors should be careful not to just pour money into anything associated with AI without looking at its valuation and path to profitability.

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Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends C3.ai and Stellantis. The Motley Fool has a disclosure policy.