I’ve written a lot about it SoundHound AI (NASDAQ: SOUND) this year. In early 2024, the company secured a multimillion-dollar investment Nvidiathe world’s largest provider of graphics processing units (GPUs) for artificial intelligence (AI). I believed this partnership was a huge vote of confidence for what was then a relatively small AI company.
A lot has changed in recent weeks. Since the beginning of November, SoundHound’s shares have increased in value by approximately 217%, adding billions of dollars to its market capitalization. Could the company implement a stock split in 2025? The answer to this question may surprise you.
AI is perhaps the hottest category on the market right now. Nvidia, one of the industry’s top suppliers, is the second most valuable company in the world. The stock prices of most AI companies have soared in the first few quarters of 2024. Somehow, SoundHound stock has flown relatively under the radar. Shares rose in the first quarter of the year after Nvidia unveiled a $3.7 million investment in the company. But stock prices quickly cooled, meaning there was no meaningful run for the rest of the year – until now.
What caught the market’s attention? Perhaps the company’s small market cap—the entire company was valued at less than $2 billion in early November—ultimately turned into an asset. There simply aren’t that many small, publicly traded AI companies anymore. SoundHound’s relatively small size may have allowed it to fly under the radar, but those days appear to be over and the company is now valued at more than $5 billion.
However, the biggest factor in SoundHound’s recent explosion is likely a big increase in revenue growth expectations. This summer, quarterly revenue growth figures fluctuated around 50%. Today, those expectations have nearly doubled to 96.7%. That’s a huge difference that should mean two things. First, SoundHound likely deserves a higher price-to-sales (P/S) ratio than before when expectations were lower. And second, the company may have a bigger and longer growth trajectory ahead of it than most analysts realized.
As the name suggests, SoundHound is involved in bringing the magic of AI to the world of sound. It has signed deals with fast-food restaurants to streamline their ride-hailing systems, with consumer products companies to provide customer support, and with several automotive brands to provide voice recognition and AI assistants to drivers. Research shows that this market is growing between 15% and 20% per year. But SoundHound’s growth rates are well above industry levels, indicating that the company has superior technology and market fit to its competitors.
