SoundHound AI: Buy or Sell in 2025?

Company Overview - SoundHound has diversified and grown its customer base while developing its proprietary voice AI model [3] - The company has made several accretive acquisitions and built an impressive customer list [4] - SoundHound has achieved a leading position in voice-enabled AI systems outside big tech, particularly in automotive and quick-serve restaurant (QSR) verticals [6] - The acquisition of Amelia has boosted SoundHound's enterprise platforms for customer service and employee-facing IT AI applications [7] - SoundHound has been developing voice AI technology since 2005 and released its Houndify platform in 2015 [8] - The company has built its proprietary voice AI model, Polaris, based on decades of experience and billions of conversations [9][10] Financial Performance - SoundHound reported 89% revenue growth in its mid-November third-quarter earnings report [11] - The company increased its full-year revenue guidance for 2024 to $82 million-$85 million and for 2025 to $155 million-$175 million [11] - Operating losses more than doubled from $14 million to $33 million last quarter, but this is manageable given the company's top-line growth [18] Market Position and Valuation - SoundHound's stock has surged 400% in two months, reaching a market cap of $9 billion [16] - The stock's valuation is 45 times next year's sales, anticipating extremely high growth for many years [16] - The rapid price increase appears to be driven by a mania in next-generation technology stocks rather than fundamentals [19] - Sell-side analysts have increased their share-price targets as the stock has risen, but this may follow rather than lead the price [20] Industry Context - Smaller AI stocks, especially those backed by Nvidia, have seen parabolic growth at the end of 2024 [5] - SoundHound has an early lead in voice AI, but large tech giants may enter the sector if it proves attractive [13] - The company's proprietary data and model give it a competitive advantage in the AI age [10] Customer and Vertical Success - SoundHound has secured seven of the top 20 QSR brands, including Chipotle, for phone and drive-through ordering [6] - The company's voice AI is embedded in many leading auto brands, including those owned by Stellantis and four major EV manufacturers [6]