Strong results from Nvidia (NASDAQ:NVDA) are propelling other artificial intelligence (AI) stocks higher, including SoundHound AI (NASDAQ:SOUN) stock.
SoundHound specializes in voice AI applications. But its shares have been falling of late, from almost $9 each in March to barely $3.50 in late April. SOUN stock was up nearly 4% in the pre-market this morning. The shares opened at $5.18 each, a market capitalization of $1.7 billion.
However, the rally might be shortlived, or at least unstable, as SOUN stock is already about 2% in the red this morning.
Nvidia Strong
Nvidia’s numbers give investors renewed confidence that valuable AI applications will soon be rushing to market.
SoundHound’s current niche is in restaurants, where it can handle reservations and kiosk orders. However, the technology has wide applications in call centers, cars, and at the front end of other applications.
SoundHound can both understand what’s being said to it and deliver a realistic computer voice back. For its most recent quarter, the company saw 73% revenue growth and gross margins of 60%. Yet it still had a loss of $30 million, 12 cents per share, for the three months ending in March. Revenue was just $11.6 million.
SoundHound is focused on restaurants after buying SYNQ3, which specializes in that business. Bulls are pointing to its partnership with Nvidia to deliver generative AI for automobiles. SoundHound Chat AI counts Stellantis (NASDAQ:STLA) among its customers.
SoundHound fell due to a negative report from short-seller Capybara Research and a $150 million stock offering needed to fund operations.
But our Louis Navillier remains a buyer. He suggests investors wait for SoundHound’s work with Nvidia to bear profitable fruit. Nvidia put $3.7 million into SoundHound in February.
Traders at Stocktwits remain enthusiastic about SoundHound, with some expecting a buyout and others calling recent price action “just a beginning.”
SOUN Stock: What Happens Next?
Applications using SoundHound are near the end of the AI value chain. Developers need to use its software and deliver their own value to customers before justifying its valuation. If there’s a boom to be had here, it has only just begun.
As of this writing, Dana Blankenhorn had a LONG position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
