SoundHound AI Stock Has Soared 136% This Year, and Here's Why

SoundHound AI (NASDAQ: SOUN) develops conversational artificial intelligence (AI) technologies. It has a market capitalization of just $1.7 billion, but it burst onto investors' radars when semiconductor giant, Nvidia , revealed it bought a small stake in the company.

Nvidia owns 1.7 million shares of SoundHound which were worth around $3 million at the time of purchase in late 2023. However, the value of that position has grown to $6.5 million thanks to the 136% gain in SoundHound stock during 2024 so far.

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

In the recent second quarter of 2024 (ended June 30), SoundHound's order backlog almost doubled from the year-ago period to $723 million.

That prompted management to increase its revenue forecast for 2024 to $80 million, representing a potential 75% increase from 2023. Plus, management thinks revenue could top $150 million in 2025, which would mark accelerated growth of 87.5%:

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

Additionally, dozens of leading restaurant brands like Chipotle and Krispy Kreme are using SoundHound's AI tools to autonomously accept orders from customers, and even to help employees manage operational tasks.

Here's the downside: SoundHound continues to lose money at the bottom line. It generated a $14.8 million non-GAAP net loss during Q2 alone, which was only a slight improvement over its $16 million net loss from the year-ago period.

Losses could be an ongoing theme for SoundHound while it tries to achieve scale. It does have a solid cash balance of $201 million, but it will have to achieve profitability within a couple of years to avoid needing more.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Nvidia. The Motley Fool recommends Stellantis and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy .