1 Top Artificial Intelligence (AI) stock ready for a run

The AI ​​craze has taken the chipmaker-dominated market by storm Nvidia. Over the past three years, Nvidia’s stock value has skyrocketed by nearly 400%. But there are other AI actions worth considering right now. One in particular — a little-known gem with a relatively small market cap — looks set for a bull run.

This AI stock has huge upside potential

If you want to invest in AI stocks with maximum growth potential, take a close look at SoundHound AI (SOUND 6.21%). It’s rare to find a company with such high growth potential trading at such a low valuation.

SoundHound was founded in 2005 by some experienced tech entrepreneurs. As the name suggests, its target category is audio, be it voice-activated AI assistants or music recognition apps. Wherever people interact with sound, SoundHound wants to improve the experience using AI.

One of SoundHound’s first success stories was with personal vehicles. In 2015, for example, its partnership with Hyundai resulted in the first music recognition service to be delivered as standard. In this case, Hyundai Genesis owners were able to talk to their car about what music is currently playing. That innovation was nearly a decade ago. In the years since, SoundHound has partnered with more than a dozen other vehicle manufacturers, including Jeep, Dodge, Kia, Hondaand Fiat to enhance the driver experience through AI voice and sound services.

More recently, SoundHound has expanded into additional end markets. It has fast casual restaurants such as Applebee’s, Five Guys and Chipotle to deals that will test SoundHound’s AI capabilities in drive-thrus, which could help reduce costs and increase efficiency. And SoundHound has also signed deals to power smart TVs, call centers and healthcare services.

Any industry, product or service that uses verbal communication is a potential use case for SoundHound’s technology, which is backed by over 200 patents. Each new deal gives the company more data to train its models on, and thus advances its ability to sign more clients and further strengthen its technology.

Is SoundHound at its peak?

It’s not hard to imagine the upside potential for SoundHound’s business model, and thus its share price. Valued at just $1.6 billion, the company is one of the lowest-valued AI companies on the public market.

AI giant Nvidia clearly sees the value in what SoundHound is doing. Earlier this year, Nvidia invested nearly $4 million to take a 0.6 percent stake in the company. Around the same time, SoundHound unveiled its new vehicle AI platform — powered by Nvidia chips — that can handle AI requests without any external connection.

“In a number of use cases,” the company said in a statement, “the new solution will allow drivers to access SoundHound Vehicle Intelligence, a product that instantly provides information directly from the car’s manual and other relevant data sources using natural speech”. With SoundHound, you can literally talk to your car about maintenance history, performance issues, and recommendations to improve drivability and lifespan. No bulky user manual required.

Use cases like this could eventually become standard in every vehicle sold. And SoundHound is leading the way. Not just in vehicle AI systems. It expands into new categories seemingly every quarter and has had no problem signing on major customers to test the technology. But what about the assessment?

NVDA PS Ratio data by YCharts

On the surface, SoundHound stock looks ridiculously expensive at 21.8 times sales — almost as expensive as Nvidia at 26.6 times sales. But both companies are growing revenue so quickly that these high multiples will quickly prove reasonable. On a forward price-to-sales basis — meaning what analysts think each company will earn next year — SoundHound trades at 10.3 times forward sales, while Nvidia still trades at 14.3 times sales. From that perspective, SoundHound looks like a relative bargain. Last quarter, sales were up 54%. And given its smaller size, it may prove able to sustain these high growth rates longer than Nvidia.

Other investors might balk at SoundHound’s high multiples. But it’s the market cap that should get you excited. In many ways, the AI ​​revolution has just begun. SoundHound’s early success and rapid growth rates should attract many long-term investors.