Why SoundHound AI Stock Soared 20% Thursday

Actions of SoundHound AI (NASDAQ: SOUND) it took off like a shot this morning, rising as much as 21.9%. When the market closed on Thursday, the stock was still up 21.7%.

The catalyst that drove the artificial intelligence (AI) specialist above was a strategic acquisition to expand its reach in the customer service industry.

Amelia AI

SoundHound AI has announced that it has acquired enterprise AI software company Amelia to expand its reach into conversational AI. The company cited its AI expertise, complementary product offerings and proprietary technology as giving the new combined company “a distinct competitive advantage in the burgeoning conversational AI space.” The press release also cited its vertical expansion into large addressable markets and diversification of its customer base as the rationale for its decision.

Amelia “provides enterprise AI solutions that are purpose-built to drive real business results,” according to its website. Conversational AI focuses primarily on customer service and employee assistance. Amelia has offerings that reach across a number of industry verticals, including financial institutions, healthcare, insurance, telecommunications and travel. Its enterprise AI solutions “create fast, personalized and efficient experiences that build loyalty and trust with every engagement.”

SoundHound is paying $80 million in cash and stock and assuming Amelia’s debt, as well as future earnings potential. SoundHound said it expects the combined company to generate more than $150 million in revenue in 2025, including $45 million from recurring sales of AI software from Amelia, and be on track for earnings in the second half of next year. The company also expects significant revenue and cost synergies, as well as a multitude of cross-selling and upselling opportunities.

It’s also worth noting that Amelia had $160 million in cash and $39 million in debt, so at first glance, it looks like SoundHound got the company for a song.

Acquisitions are always a wildcard, but investors seemed to like the deal, bidding up SoundHound AI shares in the process.

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Danny Vena has no position in any of the listed stocks. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why SoundHound AI Stock Soared 20% Thursday was originally published by The Motley Fool