SoundHound AI stock is up 136% this year, and here’s why

SoundHound AI (SOUND -8.02%) develops conversational artificial intelligence (AI) technologies. It has a market cap of just $1.7 billion, but burst onto investors’ radars when the semiconductor giant, Nvidiarevealed that he had bought a small stake in the company.

Nvidia owns 1.7 million shares of SoundHound, which were worth about $3 million at the time of the acquisition in late 2023. However, the value of that position grew to $6.5 million thanks to the 136% gain from SoundHound shares in 2024 so far.

But SoundHound’s stock isn’t rising just because of Nvidia’s involvement. Rather, the company is generating spectacular financial growth right now, pushing the stock higher.

In the latest second quarter of 2024 (ended June 30), SoundHound’s order backlog nearly doubled from a year ago to $723 million.

This has led management to raise its 2024 revenue forecast to $80 million, representing potential growth of 75% from 2023. In addition, management believes that revenue could exceed $150 million in 2025, which would mark an accelerated growth of 87.5%:

Several automakers are integrating SoundHound AI voice assistants into their vehicles, including Stellar (which owns Chrysler, Jeep, Alfa Romeo and more) and Mercedes-Benz. Drivers can use Chat AI to request real-time information about weather, local restaurants and sports scores, and use Vehicle Intelligence to learn more about their car’s features.

Plus, dozens of top restaurant brands like it Chipotle and Krispy Kreme they use SoundHound’s AI tools to autonomously take orders from customers and even help employees manage operational tasks.

Here’s the downside: SoundHound keeps losing money in the end. It generated a non-GAAP net loss of $14.8 million during the second quarter alone, which was only a slight improvement from the $16 million net loss from the year-ago period.

Losses could be a continuing theme for SoundHound as it tries to scale. It has a solid cash balance of $201 million, but will need to reach profitability in a few years to avoid needing more.