What is the hottest artificial intelligence (AI) stock on the market right now? You might think it is Nvidia (Nasdaq: NVDA). After all, the chipmaker giant recently reported impressive fourth-quarter results and forecast continued strong growth.
But there is at least one other AI stock that is outperforming Nvidia so far in 2024: SoundHound AI (NASDAQ:SON). Shares of the leading conversational AI company are up more than 80% so far this year. The company is scheduled to announce fourth-quarter results later this week.
Should you buy SoundHound AI stock ahead of Thursday's big announcement? Nvidia has it.
Nvidia's AI buying spree
SoundHound AI shareholders can thank Nvidia for its huge year-to-date gains. The stock was fluttering until Nvidia filed its 13F-HR filing with the US Securities and Exchange Commission on February 14. This filing revealed that Nvidia purchased more than 1.73 million shares of SoundHound AI.
Nvidia's investment in SoundHound was certainly big change in pocket GPU maker. There were also four other AI stocks included in the regulatory filing, two of which were much larger buys of Nvidia. However, many investors saw Nvidia starting a position in SoundHound AI as an endorsement of the small company.
This isn't the first time Nvidia has invested in SoundHound AI. In 2017, Nvidia, along with several other investors, funded a $75 million capital raise for the small company when it was still privately owned.
Why is SoundHound AI interesting?
I think SoundHound AI is definitely an interesting company. It has built an impressive customer base in recent years thanks to its voice AI technology that is arguably the best available.
SoundHound AI has been particularly successful in the automotive industry. The “who’s who” of automakers using its AI platform, including Honda, HyundaiKia, and Stellantis Car family (Alfa Romeo, Chrysler, Citroen, Dodge, Fiat, Jeep, Opel, and Peugeot).
The company has also achieved great successes in the restaurant market. Its partners include Beef O'Brady's, Crispy Creamoracle food and beverage, ToastAnd the white castle.
SoundHound estimates its total addressable market at more than $160 billion. In addition to automotive and restaurant applications, the company is actively pursuing opportunities in the entertainment and IoT 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 revenue increased 19% year over year and 52% sequentially. It also achieved strong gross profit margin By 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 achieve positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter. If SoundHound beats analysts' average estimate of $17.75 million and hits its EBITDA target, its shares could rise.
So should you buy SoundHound AI shares before the company's fourth-quarter update on Thursday? I wouldn't go that far. Scrambling to buy SoundHound AI quickly in an attempt to make big gains from better-than-expected quarterly results is a gamble.
On the other hand, SoundHound has a great long-term opportunity with its audio AI technology. It continues to experience strong growth. If you're an aggressive investor looking for AI stocks that are still small, I think SoundHound AI is worth a serious look.
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Keith Speights He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Toast. The Motley Fool recommends Stellantis. The Motley Fool has Disclosure policy.
Should you buy SoundHound AI stock ahead of Thursday's big announcement? Nvidia has it. Originally published by The Motley Fool
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