Could SoundHound AI Stock Help You Become a Millionaire?

Key Points

• SoundHound AI's products are being used in multiple industries.

• Its growth rate recently has been amplified by multiple acquisitions.

• The stock trades at an expensive valuation.

• 10 stocks we like better than SoundHound AI ›

Identifying stocks with the capability to turn a small initial investment into $1 million is the dream of every long-term investor. To do that starting with a $10,000 outlay would require a 100x return. And while there are examples of stocks that have delivered such monster returns, they are far from common.

One stock that some artificial intelligence investors point to as having that potential is SoundHound AI (NASDAQ: SOUN). It's a relatively small but rapidly growing AI company that has a ton of tailwinds blowing in its favor. Many are confident that it will outperform over the next few years, but could it really deliver 100x returns from here?

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Image source: Getty Images.

SoundHound AI's product is growing in popularity

The key to finding a stock with 100x return potential is to look for a relatively small business that's providing a product that could be used by people or businesses essentially everywhere. SoundHound AI combines audio recognition technology with generative AI to automate conversational interactions that are typically human to human, like drive-thrus and talking to a customer service representative over the phone. There is a massive market for this, so I think it easily checks the box as a product that the masses and many companies could use.

SoundHound AI is already thriving in multiple industries, with several large restaurant chains deploying its software at drive-thrus and to take over-the-phone orders. Additionally, seven of the world's top 10 global financial institutions utilize SoundHound's product, and four of them either renewed their contracts or expanded them in Q2.

This shows significant momentum, and that is trickling down to SoundHound AI's results. In Q2, SoundHound AI grew its revenue by 217% year over year, and management boosted its guidance for 2025. However, part of this growth came from some acquisitions it has made over the past year, so it wasn't all organic growth.

Organic growth reflects only those parts of a business that were owned in the prior-year period, so it gives investors a true apples-to-apples comparison of how a business is growing. When an acquisition is thrown into the financial results, it muddies the comparison by adding in contributions from parts of the business that it hadn't previously owned.

While SoundHound AI's management team didn't break down how much of Q2's 217% growth was organic, they did comment that they think an organic growth rate of 50% or greater is achievable for the "foreseeable future." This makes SoundHound AI an intriguing stock, as that level of growth is rare.

A sustained 50% growth rate could lead to a stock delivering 100-bagger returns, but just how long would it need to sustain that growth rate to justify that result?

SoundHound AI needs more than a decade of 50% compound annual growth

If a company maintained a 50% annual revenue growth rate, it would take a little over 11 years to increase its top line by 100 times. That time frame falls outside of the foreseeable future that management discussed.

Furthermore, for SoundHoundAI's revenue to increase 100-fold, it would go from a business with $131 million in sales to one with $13.1 billion.

SOUN Revenue (TTM) data by YCharts.

Now, $13.1 billion in annual revenue is a lot for a software company, but it's not unheard of. For example, Adobe (NASDAQ: ADBE) currently has trailing revenues of $23.2 billion. However, Adobe is also much cheaper on a price-to-sales (P/S) basis than SoundHound AI, and the smaller company's valuation will likely fall over the next few years as it matures.

SOUN PS Ratio data by YCharts.

Trading at nearly 50 times sales, SoundHound AI is an expensive stock. It's more common for software stocks to trade in the 10 to 20 times sales range. This will work against its share price growth and would likely extend the required growth period for a 100x result beyond 11 years.

So, could SoundHound AI turn a $10,000 investment into $1 million? I'd say it's possible, but highly unlikely. However, just because a stock can't provide millionaire-maker returns doesn't mean investors should avoid it. I still think that there's a strong chance that SoundHound AI can provide market-crushing returns over the next few years if management can deliver on its 50% annual growth forecast.

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Keithen Drury has positions in Adobe. The Motley Fool has positions in and recommends Adobe. The Motley Fool has a disclosure policy.