Artificial intelligence (AI) whipped investors into a frenzy in 2023. They raced to deploy money into companies developing the technology, including Nvidia (NASDAQ: NVDA) which saw a 239% increase in its stock price for the year. The momentum is still building, with Nvidia stock climbing a further 76% in 2024 to date.
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But SoundHound AI (NASDAQ: SOUN) is doing even better right now. Its stock is up a whopping 194% this year so far, thanks mostly to the news that Nvidia recently made a small investment in the company. SoundHound is a leading developer of conversational AI, which uses voice recognition to create virtual assistants capable of having detailed discussions.
SoundHound is worth just $1.6 billion, but it has attracted some of the largest companies in the world across the hospitality and automotive industries as customers, from Krispy Kreme to Mercedes-Benz.
However, SoundHound generates surprisingly little revenue. It brought in just $45.8 million during 2023 which was a 47% increase from 2022. The company’s guidance for 2024 suggests growth will accelerate to 52%, with revenue expected to come in at $70 million.
SoundHound AI has an enormous order backlog
At the end of 2023, SoundHound told investors it had an order backlog worth a whopping $661 million, which was double the backlog it held at the end of 2022. So, although the company’s revenue is modest right now, orders are piling up and that could drive a substantial increase in the coming years.
Nevertheless, SoundHound stock seems quite expensive right now. Its $45.8 million in 2023 revenue combined with its $1.6 billion market capitalization translates to a price to sales (P/S) ratio of 34.9 — that’s even higher than Nvidia’s P/S ratio of 34.5!
Therefore, while SoundHound stock does have potential, investors might want to temper their expectations in the near-term.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
SoundHound AI Stock Is Soaring, but the Company Generates Surprisingly Little Revenue was originally published by The Motley Fool
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