Prediction: SoundHound AI Stock Will Soar in 2025

One artificial intelligence (AI) stock that has garnered significant attention recently is SoundHound AI (NASDAQ: SOUN). The hype surrounding this stock is fueled by its rapid growth and strong outlook heading into 2025. Investors would be wise to keep a close eye on SoundHound as its stock price could see substantial gains in the near future.

SoundHound is Revolutionizing Voice Recognition

As the name implies, SoundHound AI merges AI with audio recognition technology. For years, we’ve seen various implementations of AI-powered voice assistants in cars, homes, and smartphones. However, the effectiveness of these voice recognition systems has historically left much to be desired, often providing only mediocre accuracy and response quality. SoundHound is changing the game by delivering significant advancements in this technology, which has already seen widespread adoption across several fields.

One of the standout areas where SoundHound has achieved success is in the automation of restaurant orders. Whether via telephone or in drive-thru scenarios, SoundHound’s AI-driven products have demonstrated the ability to outperform human workers in both speed and accuracy, thereby enhancing operational efficiency in the food service industry.

Moreover, SoundHound is making inroads into the automotive market. It has partnered with Stellantis to introduce generative AI-powered chatbots—technology that far surpasses the limitations of standard vehicle assistants found in older models. Although this innovation has yet to reach the U.S. market, it is currently integrated into new Stellantis vehicles rolling out in Europe and Japan. The ongoing expansion of SoundHound’s technology into new sectors sets a solid foundation for potential investment growth.

A Promising Outlook for 2025

According to reports from the company’s third-quarter earnings, SoundHound’s revenue spiked an impressive 89% year-over-year to reach $25.1 million. It’s important to note that a year prior, a staggering 90% of SoundHound’s revenue stemmed from the automotive sector. Fast forward to the latest quarter, and automotive revenue now constitutes only about 25% of the total, indicating diversification into sectors such as restaurants, financial services, insurance, and healthcare.

Although SoundHound is still not profitable—registering an operating loss of $33.8 million for the quarter—this is not necessarily alarming given its early-stage growth trajectory. Importantly, management is projecting full-year 2024 revenue to fall between $82 million and $85 million, reflecting a remarkable increase of over 75% from the previous year. For 2025, management anticipates revenues soaring between $155 million and $175 million, bolstered by the recent acquisition of Amelia, an enterprise voice AI company. In a further display of optimism, management expects to achieve positive earnings before interest, taxes, depreciation, and amortization (EBITDA) by year’s end in 2025.

Valuation and Market Dynamics

Investors should also consider SoundHound’s valuation in light of its unprofitability. A common metric for assessing companies in this phase is the price-to-sales (P/S) ratio. Currently, SoundHound’s stock trades at a high P/S ratio of 29. While this figure may raise eyebrows, it is not out of the ordinary for top-performing AI stocks in today’s market. For example, Palantir—which is among the S&P 500’s best performers in 2024—trades at over 55 times sales despite reporting less impressive revenue growth compared to SoundHound.

However, caution is warranted. With SoundHound’s premium valuation comes significant risk; shareholders should be well aware that expectations are stratospherically high. Many of SoundHound’s business partnerships are still in their nascent stages and could be disrupted by market changes or competitive pressures. Hence, prudent investors should ensure their portfolio’s exposure to SoundHound reflects the associated risks of such a volatile growth stock.

The Bottom Line

If SoundHound can hit its financial targets, continue to grow its customer base, and further branch out into various industries, it stands to be a standout in 2025. I would not be surprised if SoundHound AI emerges as one of the year’s most exceptional performing stocks. For those grounded in traditional financial principles yet willing to embrace innovation, SoundHound could very well be the investment to watch as we head into 2025.