Financial Markets

Could SoundHound AI Be the Next Palantir?

Palantir Technologies (NYSE: PLTR) has been one of the most exciting stocks of 2024, rising around 275% year-to-date at the time of this writing. Those are impressive returns that every investor wants, which causes many to hunt for stocks that could be the next Palantir (at least in terms of stock performance).

With how exciting the artificial intelligence (AI) investing space is right now, it’s an excellent hunting ground for finding stocks with massive upside. Many have identified SoundHound AI (NASDAQ: SOUN) as one AI stock with that kind of potential. So, could SoundHound AI be the next Palantir?

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SoundHound AI isn’t trying to hide what it does with its name. It has an AI-powered audio recognition platform that helps convert speech input to a format that AI can use as an input. This technology has ramifications everywhere and has already found many use cases.

SoundHound AI’s technology has already brought AI to drive-thru windows, digital assistants in cars, and banking. This wide use case is only just the beginning for SoundHound AI. As you can imagine, there are countless places where having accurate speech input into an AI model would be useful.

This has translated into a booming business for SoundHound AI, even if it is just at the beginning stages of really seeing its business explode. In Q3, SoundHound AI generated $25 million in revenue, up 89% year over year. For reference, Palantir generated $725 million in revenue, so SoundHound AI is much smaller.

One of the biggest investment cases for SoundHound AI is its massive revenue backlog. This figure comes from the potential revenue that can be recognized if the contracts they’ve signed pan out, which isn’t a perfect metric, but it gives investors an idea of how the business could progress. As of Q3, management stated that it’s “well north of $1 billion” over a period of about six years. This underlies the massive growth potential in SoundHound AI’s stock, and it looks poised to convert some of that backlog to real revenue in 2025.

Management guided that revenue will be between $155 and $175 million in 2025. Considering that SoundHound AI’s 2024 projected revenue is $84 million, its revenue will double next year. That’s explosive growth, and considering SoundHound AI’s backlog performance, it likely can continue even after 2025.

SOUN Revenue (TTM) data by YCharts

Furthermore, the breadth of its revenue stream is expanding. During last year’s quarter, 90% of revenue came from the automotive sector. Now, no sector accounts for more than 25% of total revenue. On a customer level, 72% of revenue came from a single client last year. This year, the largest customer accounts for only 12% of sales.


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