After what looked like a lull in trading and decreased interest in the stock, shares of SoundHound AI (NASDAQ: SOUN) appear to be taking off again. The company's potential in the voice artificial intelligence (AI) market drove a lot of bullishness in the stock earlier in the year, but that proved to be a short-lived rally. But now, investors are excited once more about the stock, given some fairly exciting developments. Can the rally last this time, and should investors buy this hot AI stock?
SoundHound's voice assistant is in production with top European brands
Last week, SoundHound announced that its AI voice assistant, which integrates with ChatGPT, is now live with several different Stellantis brands, including Peugeot, Opel, and Vauxhall. The voice assistant gives users the ability to make hands-free voice commands and ask questions about any topic, all while driving. The company calls this a milestone for its business as it looks to "revolutionize in-vehicle voice assistants."
The press release didn't provide any estimate as to how much revenue this might mean for the business, but investors were bullish on the news all the same. Shares of SoundHound popped 22% on the day of the press release and would go on to climb even further as the week progressed. In just the past month, the stock is now up 40%.
Investors should be careful not to make too much out of this news
It's certainly positive news that SoundHound's AI assistant is being deployed with more automotive brands, but investors should also temper their expectations. The company has partnered with many top companies, including Hyundai and Mercedes-Benz , and it has also attracted an investment from Nvidia , which was a key catalyst in the stock becoming a hot buy earlier in the year.
While having some new deals go live and into production should lead into an influx of revenue for the business, it's unclear just how much that will be and how transformative it could end up being for the business. The scale of these rollouts and how profitable they are for the business are factors which will ultimately matter the most in the end.
On May 9, the company reported its most-recent earnings numbers, where it posted impressive year-over-growth of 73% for the first three months of the year. But even with revenue soaring to $11.6 million for the quarter, the company's net loss still increased by 20% to just over $33 million. The challenge for SoundHound will be to prove that it can attract top brands and be able to grow while improving its bottom line; the company simply hasn't shown that it can do that just yet.
Should you buy SoundHound AI stock today?
Thanks to these recent developments, SoundHound AI stock hit highs of more than $6, a level it hasn't reached since March. With some renewed excitement in the stock, there's hope that this can be the start of a much bigger rally.
Investors, however, should be careful not to read too much into these developments. That's because although they are positive and encouraging for the business, what's going to make this rally last is if this news results in stronger financials for SoundHound, and if investors can see a path to profitability . Up until now, that hasn't been the case, even as SoundHound has been working with many top auto brands.
The prudent thing for investors to do is take a wait-and-see approach with SoundHound AI and see how it performs in the next couple of quarters to confirm it is going in the right direction and its losses are shrinking. The stock has been a volatile investment this year, and that may continue to be the case unless the company can prove that it has some strong fundamentals to give growth investors a reason to hang on to the stock for the long term.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy .
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