Artificial intelligence (AI) stocks are some of the hottest names on Wall Street. Palantir nologies and Nvidia have ridden the AI wave to amazing heights, surging by 900% or more in just a few years.
However, it's still possible to find AI stocks that are not at all-time highs. For example, SoundHound AI (SOUN -3. 01%) is almost 50% off its all-time high. Is its stock a buy. Let's find out.
Image source: Getty Images. What does SoundHound AI do. The company is leader in the development and deployment of voice-powered AI systems.
These tools allow users to communicate with AI tools using speech. In particular, SoundHound offers two key ducts: Houndify and SoundHound Chat AI.
Houndify is a system that allows es to integrate conversational and contextual speech into their AI-powered tools. One of the best examples of Houndify in action is Hyundai's in-vehicle AI system.
Passengers can ask the vehicle "Do I need an umbrella today. " and the vehicle will recognize that the person is really asking "Will it rain today.
" SoundHound Chat AI integrates with large language models such as ChatGPT. Similar to Houndify, it vides context, cutting down on the need for awkward phrasing or highly detailed requests or queries.
This, in turn, reduces friction and imves the quality and speed of communication between people and AI systems.
Users that deploy SoundHound Chat AI can build advanced conversational assistants, imving their adoption of agentic AI and increasing their organization's efficiency. Where is SoundHound stock going.
The first thing to note is that SoundHound is a tiny company compared to many of the giants involved in AI. It has a market cap of less than $5 billion.
For comparison, Palantir, another leading AI stock, has a market cap of more than $300 billion.
For SoundHound to increase its market cap, it will need to imve several key metrics, starting with revenue. Over the last 12 months, has generated slightly more than $100 million in sales.
Quarterly revenue has increased 150% year over year. According to estimates compiled by Yahoo.
Finance, sell-side analysts expect the company's annual revenue to increase to $160 million this year and $203 million in 2026. If it can reach those revenue targets, its stock should perform well.
But there are risks to owning it. For starters, the company isn't fitable. Over the last 12 months, SoundHound has reported a net loss of $188 million.
Moreover, free cash flow has also been in the red, at $107 million.
And while the company does have around $250 million in cash on its balance sheet, that only gives it two years at its current burn rate before it will need to access additional funds via the debt market.
Furthermore, the competitive landscape for AI is fierce.
Large, deep-pocketed players Alphabet, Meta Platforms, Amazon, Microsoft and others are all plowing tens of billions into AI in an attempt to gain a competitive advantage.
Given its small size, it's possible SoundHound could be pushed to the side by the larger players.
On the other hand, it's also possible that it could be gobbled up by one of those giants -- the competitive AI market cuts both ways. Is SoundHound stock a buy now.
Let's get one thing : SoundHound stock isn't for every investor. Given the company's lack of fits and the inherent volatility of the AI sector, it remains risky.
However, it's unwise to overlook the company's potential. AI adoption is growing fast, and organizations are eager to implement voice AI that can imve customer satisfaction.
So, while SoundHound AI remains risky, it could be a smart choice for growth-focused investors willing to keep their total exposure small.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors.
Jake Lerch has positions in Alphabet, Amazon, and Nvidia and has the ing options: long January 2026 $10 calls on SoundHound AI and long July 2025 $425 puts on Microsoft.
The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Palantir nologies.
The Motley Fool recommends the ing options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.