John Ballard, The Motley Fool
5 min read
In This Article:
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SoundHound AI's proprietary voice technology is tapping into a rapidly growing market.
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Duolingo is well-positioned to capitalize on the booming online learning market.
If you're looking for stocks with huge return potential, you can increase your chances of success by focusing on companies that operate in a rapidly expanding industry. Great investments are usually made by jumping early on fast-growing companies that have enormous expansion potential for their particular sector.
Here are two promising candidates that could potentially grow their share prices 10-fold in the coming years.
Share prices of SoundHound AI (NASDAQ: SOUN) have been volatile, At the time of this writing, the stock is up 342% since the end of 2023. This follows growing demand for the company's conversational voice technology powered by artificial intelligence (AI).
SoundHound's revenue more than doubled year over year in the first quarter. This comes after last year's acquisition of Amelia, which expanded SoundHound's technology to customer services across multiple industries, including retail and healthcare.
AI is having a major impact on how people order at restaurants and interact with in-car services -- two of SoundHound's biggest markets. As AI's capabilities grow exponentially, demand is surging for SoundHound's voice AI. Over 1,000 new restaurant locations went live with SoundHound in Q1 -- a 10-fold increase over a year ago.
The main negative for the company is that it is not earning a profit. In Q1, it reported a non-GAAP (generally accepted accounting principles) loss of $22 million, which is quite large on just $29 million of quarterly revenue. SoundHound generates revenue from product royalties, service subscriptions, and ads on its music identification app. These can be profitable revenue streams, so I wouldn't be too concerned about SoundHound's profitability at this early stage of growth.
Keep in mind that SoundHound is not using off-the-shelf AI. Its AI is proprietary, based on 20 years of investment using data from real user interactions. SoundHound also has a strong balance sheet, with $246 million of cash and no debt.
The company's growth shows huge market potential for its technology. The AI voice generator market is growing exponentially, expected to increase from $3 billion in 2024 to over $20 billion by 2030, according to MarketsandMarkets.
SoundHound's market cap is currently $3.76 billion, with its share price around $9.40. Its market cap has to increase to $37.6 billion to deliver a 10-fold return to investors. This is possible within the next 10 years, considering SoundHound's rapid growth and the long-term trends supporting more AI integration across the economy.
