Hitting a home run in investing can be very satisfying as the returns can be incredible. But alongside home runs come strikeouts, and when you’re an all-or-nothing style of investor, strikeouts happen a lot more than home runs. Still, if the overall returns make up for the massive losses, this can be a worthy investment strategy for those with the right stamina.
These days, some investors might be looking for artificial intelligence (AI) stocks with this home-run potential, and I think I’ve pinpointed one. SoundHound AI (NASDAQ: SOUN) has the makings for a potential home-run investment and is also backed by Nvidia (NASDAQ: NVDA). There’s no better partner in the AI space.
Let’s see what could make SoundHound a top choice for those swinging for the fences.
Its audio recognition technology is thriving in two fields
SoundHound AI integrates AI with audio recognition. While this has multiple applications, two fields where SoundHound has made the biggest impact are restaurants and automobiles. For restaurants, SoundHound has been automating drive-thru windows and taking orders by phone. Margins in the restaurant business are notoriously slim, so if a restaurant can reduce headcount by using AI at a cheaper cost, it will.
SoundHound’s audio recognition technology is being integrated into digital assistants in the automotive industry. Hands-free technology has been around for over a decade, but it’s clunky technology that doesn’t always work right. SoundHound fixes this problem and integrates generative AI technology with its product by utilizing ChatGPT.
However, this requires internet connectivity to function properly, so Nvidia and SoundHound teamed up to embed a large language model onto an onboard GPU that allows this model to function regardless of where the vehicle is located.
Overall, SoundHound offers a great value proposition for customers. However, there are some concerns about the company’s financials.
SoundHound is burning a lot of cash
In the first quarter, SoundHound’s revenue increased 73% year over year to $11.6 million. While that’s an impressive headline figure, $11.6 million isn’t a lot of revenue compared to most companies.
The issue with SoundHound’s financials is its burn rate, as the company is highly unprofitable. Even though it generated $11.6 million in revenue, it posted a $28.5 million operating loss, which means it’s spending about 4 times as much money as it’s bringing in. That’s an unsustainable model, but it should be expected for a company still in the early innings of deploying its products.
SoundHound’s saving grace is its massive backlog. This metric sums up all of the bookings it has in the future, which isn’t a guarantee of revenue. But it paints a picture of the potential demand. If SoundHound converts its $682 million backlog into true revenue, it will have achieved massive success.
With such a large backlog, SoundHound should have no issue raising additional funds by issuing shares on the public market, allowing it to sustain its unprofitable habits.
But does all of this add up to a stock worth taking a swing at? Although the stock used to trade for a much higher valuation during the initial AI hype cycle at the start of the year, 20 times sales is still expensive for the stock of a company that still has a lot of work to do before it’s viable.
SOUN PS Ratio Chart
I still think there’s enough of an investment here to take a shot at SoundHound, but anyone who buys the stock must be prepared to watch their investment go to zero. If you have that ability, then it’s a stock worth considering, as it does have a lot of potential. But remember to keep position sizing very small, as a total loss is a possibility.
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
