SoundHound AI (NASDAQ: SOUN) has taken the market by storm, with its stock price skyrocketing 31.33% on Thursday, December 6, to close at $13.33.
This marks a staggering 134% gain in the past month and an impressive 175% over the last six months, solidifying SoundHound’s position as one of 2024’s top-performing artificial intelligence (AI) stocks.
A new restaurant deal fuels market enthusiasm
The primary catalyst for this meteoric rise is SoundHound’s announcement of its AI Smart Ordering service rollout at Torchy’s Tacos, covering all 130 of the restaurant’s locations.
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This conversational AI service streamlines restaurant operations by managing 100% of incoming calls, answering queries about menu items, and allowing staff to focus on food preparation and in-store service.
“As we continue to scale our AI-powered restaurant solutions, we have seen the impact they have in redefining how restaurants engage with their customers, adding an entirely new layer of convenience and efficiency,” said James Hom, Chief Product Officer of SoundHound AI.
While this deal highlights SoundHound’s ability to innovate and secure high-profile clients, the scale of the announcement alone doesn’t fully explain the explosive surge above 30%.
Instead, broader market enthusiasm for AI stocks and SoundHound’s popularity among meme stock traders have amplified the gains.
Solid financial growth and business diversification
Beyond speculative trading, SoundHound’s strong financial performance has bolstered investor confidence. The company reported $25.1 million in revenue for Q3 2024, an 89% year-over-year increase, and raised its full-year revenue guidance between $82 to $85 million.
For 2025, SoundHound projects revenue between $155 to $175 million, nearly doubling its annual outlook.
SoundHound’s partnerships are the cornerstone of its expansion strategy, enabling the company to penetrate key markets. Its collaboration with Stellantis (NYSE: STLA) has extended the reach of its generative AI voice assistant, now powering vehicles from Alfa Romeo to Peugeot across Europe and Japan, with a U.S. rollout anticipated soon.
In parallel, SoundHound’s collaboration with Nvidia (NASDAQ: NVDA) significantly enhances its technological capabilities, enabling its in-vehicle voice assistants to function seamlessly without requiring internet connectivity.
Further bolstering this alliance, Nvidia disclosed earlier this year that it holds 1.7 million shares of SoundHound, equivalent to a 0.5% stake, lending both technological and financial credibility to SoundHound’s growth narrative.
Risks loom amid valuation concerns
Despite SoundHound’s impressive growth trajectory, challenges remain on its journey to profitability. The stock’s lofty valuation, trading at 32.5 times projected sales according to StockAnalaysis, leaves it highly vulnerable to market fluctuations.
Adding to the pressure, the company has yet to achieve profitability, reporting a GAAP EPS loss of $0.06 and a non-GAAP EPS loss of $0.04 in its most recent quarter.
Wall Street analysts also suggest tempered expectations, with a consensus Moderate Buy rating and an average price target of $8.10, implying a potential downside of 13%.
What’s next for SoundHound AI?
While the Torchy’s Tacos deal underscores its commercial appeal, the stock’s explosive rally may not be sustainable. Investors should focus on the company’s strong fundamentals, including its increasing revenue and diverse client portfolio while being cautious of the near-term volatility.
For long-term investors, SoundHound’s leadership in conversational AI and its $140 billion addressable market offer compelling reasons to stay optimistic despite short-term fluctuations.
Featured image via Shutterstock