McDonald’s (NYSE:MCD) recently announced that it is ditching its artificial intelligence (AI)-powered voice ordering technology, powered by International business machines (NYSE: IBM). Instead, the fast food giant will look to replace the technology with an alternative solution by the end of the year.
Let’s take a closer look at McDonald’s decision and what impact it could have on it SoundHound AI (NASDAQ: SOUND)whose voice-activated AI technology has been gaining traction in the restaurant space lately.
A potential McDonald’s replacement
McDonald’s decision to end its partnership with IBM for automated order taking technology after a two-year trial period comes as a surprise, as the restaurant chain sold IBM the technology powering the solution in the fall of 2021. McDonald’s originally purchased an AI voice starter. -up named Apprente in 2019 and integrated it into a venture called McD Tech Labs, which later sold it to IBM. Since that deal, it has tested the technology, deploying it in more than 100 locations.
The voice order technology will be turned off at all locations on July 26 this year. When the technology was first rolled out, McDonald’s said it was 85% accurate and could process 80% of orders. However, with social media, some of the technology’s bigger mistakes went viral, such as adding ketchup packets and butter to an order for sundaes and water.
Mason Smoot, McDonald’s restaurant chief, told franchisees that the company was pleased with the trial, but that there was “an opportunity to explore voice ordering solutions more broadly.”
SoundHound is a potentially logical choice as a replacement for IBM, as the company has gained significant traction in the restaurant world with its AI-powered drive-thru voice ordering technology and other industry-specific applications. These include the Smart Ordering platform, which takes orders and answers questions through incoming phone calls, as well as the Employee Assist solution, which acts as a co-pilot through an employee’s headset to answer any questions, such as how to clean the ice. cream machine.
SoundHound has signed deals with several major quick service restaurant (QSR) chains, including White Castle, Jersey Mike’s, Five Guys, Noodles & CompanyAnd Chipotle Mexican Grillalong with top restaurant fintech companies such as Toast, OloAnd Square. As such, it’s certainly a viable candidate to replace IBM as McDonald’s new voice AI-powered ordering technology partner.
However, SoundHound is not the only candidate. Wendy’s used Alphabet Google Cloud will power its Fresh AI platform that it is testing at some of its drive-thrus. Meanwhile, QSRs like Del Taco, are owned by Jack in the boxRally’s, Checker’s and CKE have used solutions from companies such as Presto Automation, Hi Auto tech, OpenCity and Valyant AI.
In fact, Alphabet could be the favorite to land the deal, as McDonald’s and Google Cloud reached an agreement last December to deploy generative AI solutions in their restaurants around the world. But even with the Wendy’s deal, voice AI is still not Google’s core competency, and if SoundHound has the better solution, it could still win the McDonald’s deal.
Time to Buy SoundHound Stock?
Given McDonald’s recent deal with Google Cloud, SoundHound is likely not considered the favorite to win the deal, but if it were, it would help validate the company as a leader in voice AI, and would stock will certainly be in the news. . So the fact that McDonald’s isn’t immediately making a new deal and exploring alternatives is good news, and SoundHound will likely get a chance to show off its technology to the fast-food giant.
SoundHound shares trade at a price more than 20 times their sales price (P/S). However, the company has grown its revenue rapidly and built up a large backlog. Meanwhile, a super-sized McDonald’s catalyst could be on the way.
Opportunities like McDonald’s and the company’s push into other industries and appliances outside of its core automotive and restaurant verticals could help the stock price from here. While SoundHound has a lot of potential, it still remains a speculative investment considering its valuation and the fact that it is still in the early stages of its growth phase. Therefore, any investments in these growth tech stocks should be sized accordingly, given the risk.
Should you invest $1,000 in SoundHound AI now?
Before purchasing shares in SoundHound AI, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $830,777!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet, Block and Toast. The Motley Fool holds positions in and recommends Alphabet, Block, Chipotle Mexican Grill, Olo and Toast. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
McDonald’s is ditching AI Drive-Thru Voice technology. What could this mean for SoundHound AI stock? was originally published by The Motley Fool
