Artificial intelligence (AI) is still in its early days, but it has the chance to become a game-changing technology, much in the same way as the internet and smartphones. Those technologies produced a number of winning companies and helped create many millionaires along the way.
Let's look at one company that has the potential to be a millionaire maker in the future: SoundHound AI(NASDAQ: SOUN).
A leader in voice AI
SoundHound has developed a voice AI platform called Houndify that helps voice assistants interact with humans in a more natural and conversational manner. It does this by combining speech-to-meaning technology and deep-meaning-understanding technology. The former lets voice AI assistants process speech in real time even before someone is finished talking, while the latter helps recognize a user's intent.
The company has made strong early inroads into the automotive space, where its platform has been designed into a number of vehicle models from various manufacturers. The company currently has relationships with numerous auto brands, including Hyundai, Kia, Honda, and Stellantis, among others. Peugeot, Vauxhall, Opel, Citroën, and Alfa Romeo, which are Stellantis brands, all went into full production with SoundHound's technology recently, bringing the total to six Stellantis brands. In its most-recent earnings release, it also said a U.S. electric vehicle maker was about to soon go into production with its SoundHound Chat AI voice assistant.
While the company is making strides in this market, its penetration remains quite low. SoundHound said its current customers produce around 25 million vehicles a year, but that it's platform is in only around 3% to 5% of them. It believes it has the opportunity to double it customer base in the auto space, while also increasing penetration to 40% to 45%.
If it were to reach that goal, the technology would go from being in about 1 million vehicles in 2024 to 19 million in 2028. Given that SoundHound receives royalties on each vehicle its platform is in, this would lead to some exponential growth.
The other big vertical that SoundHound has gotten into is the restaurant space. The company has a number of industry solutions, including for drive-thrus, phone orders, and employee assistants. It sees this as a $1 billion revenue opportunity in the U.S. by 2028.
The company has signed deals with a number of leading restaurants, including Chipotle, White Castle, Five Guys, Noodle & Company, and Jersey Mike's, among others. It also has deals with restaurant-focused fintech companies such as Toast, Block, and Olo.
Image source: Getty Images
What the Amelia acquisition could mean
While the company has been building momentum in the auto and restaurant verticals, its recent acquisition of Amelia will help push its services into other industry verticals. Amelia's conversational and generative AI platform is used by organizations to help with such tasks as customer service, employee onboarding, and back-office work. Its platform is used in a variety of different industries, including healthcare, financial institutions, insurance, and retail.
At the time of the deal, SoundHound said the combined companies would have more than $150 million in revenue next year, with Amelia contributing more than $45 million of the total. It would have $160 million of cash and $39 million in debt on its balance sheet following the $80 million purchase.
Technology advisory firm QKS Group, which helps companies select and adopt technology, believes the Amelia acquisition, along with earlier ones of SYNQ3 and Allset, will help SoundHound create an entire commerce voice ecosystem that can handle more sophisticated interactions across a variety of industries. This includes such things as making doctor's appointments or financial transactions through voice control, or even having complex questions answered without the need for a human. It believes the company may need more technology acquisitions to fill in some gaps, but that it is headed in this direction.
Is the stock a buy?
SoundHound is still more visionary than results-oriented at this time. It is growing nicely from a small base and is getting some great wins, but its potential is still largely tied to what the company could become, not what it is currently.
Trading at an more than 10.5 times forward price-to-sales ratio based on 2025 analysts estimates, the stock is not cheap per se. However, given its more than 50% revenue growth recently, the stock isn't overly expensive either.
SOUN PS Ratio (Forward 1y) data by YCharts
At the end of the day, SoundHound is a speculative investment, as the company is still in its early growth phase and unprofitable. However, if it can create an unmatched commerce voice ecosystem, it very well could become a millionaire-maker investment in the future. That said, investors should expect the stock to have a lot of volatility, meaning it's best suited for risk-tolerant investors.
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Geoffrey Seiler has positions in Block and Toast. The Motley Fool has positions in and recommends Block, Chipotle Mexican Grill, Olo, and Toast. The Motley Fool recommends Stellantis and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
