It’s hard to get a 147% return in a few months, but that’s just the way it is Nvidia (NASDAQ: NVDA) achieved with a multi-million dollar investment this year. The investment was one of several AI companies that Nvidia decided to back. These were all companies it has worked with in the past, so it presumably knows them quite well. Despite the huge gains, Nvidia appears to be sticking to its fairly recent stock purchases. Investors looking for maximum growth should consider getting in.
This AI Stock Could Have 1,000% More Upside
Less than a year ago, Nvidia invested $3.7 million in SoundHound AI (NASDAQ: ZOE) stocks. Shares are up 147% since then, but there is reason to believe they could rise again 10 times in value over the long term. But before you invest, there are a few things you should consider.
At its core, SoundHound AI is a company focused on bringing AI to all things sound. From voice assistants to drive-thru ordering, when you chat with a speaker, SoundHound AI wants its technology to be there. With over a decade in business, the company has amassed over 200 patents and an impressive customer list that continues to grow.
In 2022, it signed a seven-year contract with Hyundai to power its voice-activated AI capabilities. Drivers will be able to chat with their vehicles, not just to send messages, get directions, or turn the air conditioning on or off, but also to check on maintenance issues and discuss how the vehicle is performing. It’s impressive. Within the next few years, that giant owner’s manual sold with new cars could be replaced by a simple conversation, one that’s directly between you and the vehicle.
SoundHound AI has several vehicle manufacturers as customers. But it is also active in other industries, including restaurants and fast food chains. Applebees and White Castle, for example, are testing the technology to improve order times and reduce overhead costs. This may be one of the most popular ways we all interact with AI technologies in the near future.
Despite its vast technology portfolio, growing customer base, and sizable end markets—not to mention Nvidia’s backing—Sound’s market cap remains just under $2 billion. To gain 1,000% in value, the company would need to reach a valuation of around $20 billion. That’s not much of a leap in the volatile AI industry, which could be one of the biggest growth opportunities in a generation.
Shares are trading at 22 times sales, but over the past two years, sales have grown by more than 150%. If it can match those growth rates, shares would trade between 5 and 6 times 2026 sales. That’s a much more palatable valuation, although it will take some patience and execution to get there.
Should You Invest in SoundHound?
It’s clear that SoundHound AI’s end markets alone would support a $20 billion valuation. According to management, the voice AI market has a total addressable market value of at least $140 billion. SoundHound AI’s unique technology can be used across multiple industries, and its early lead bodes well for its ability to capture a growing share of an otherwise growing opportunity.
But there’s a reason SoundHound still trades at a paltry $1.7 billion in market cap. The company remains loss-making, meaning it must continually raise funds to stay solvent. That limits its ability to invest in research and development, perhaps its most valuable use of funds in the long run.
Research and development spending was only about $56 million last year, up 30% decrease at the highest level of spending in 2023. Major technology companies, including Apple And Alphabetinvest billions dollars in this space. The competition will be intense in the long run, and it’s not clear whether SoundHound AI has the capital to survive, let alone thrive.
If you’re looking for a speculative growth stock with huge long-term potential, SoundHound AI could be for you. The backing of Nvidia is certainly a plus. But volatility should remain high and the potential downside is significant as well. This is truly a boom-or-bust investment opportunity, for risk-tolerant investors only.
Should You Invest $1,000 in Nvidia Now?
Before you buy Nvidia stock, here are some things to consider:
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Nvidia Just Made a 147% Gain Betting on This AI Stock was originally published by The Motley Fool
