Why SoundHound AI Stock Rocketed 20% Higher on Thursday

Shares of SoundHound AI (NASDAQ: SOUN) took off like a shot this morning, soaring 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 higher was a strategic acquisition to expand its reach in the customer service industry.

Amelia AI

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

Amelia "offers enterprise AI solutions that are purpose-built to drive real business results," according to its website. Its conversational AI is primarily focused 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 quick, personalized, and efficient experiences that build loyalty and trust with each engagement."

SoundHound is paying $80 million in cash and stock and the assumption of Amelia's debt, as well as the potential for future earnout potential. SoundHound said it expects the combined company to achieve revenue in excess of $150 million in 2025, including $45 million in recurring AI software sales from Amelia, and be accretive to earnings in the second half of next year. The company also expects meaningful 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 seems like SoundHound got the company for a song.

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

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