Could This Be the Catalyst That Sends SoundHound AI Stock Skyrocketing?

Voice artificial intelligence (AI) company SoundHound AI (NASDAQ: SOUN) has seemingly fallen out of favor with investors. In the past 12 months, it has declined 17% in value. While many other tech companies involved with AI have been doing well and seeing their share prices rise, SoundHound AI has been a far different story.

Its market cap is right around $5 billion, which could make the stock an appealing option for AI investors looking for the next big stock to own. SoundHound may just need a catalyst to get its stock going again and to win over investors. The key could be its success in agentic AI.

Image source: Getty Images.

Could agentic AI unlock a huge growth opportunity for SoundHound?

SoundHound has been busy with acquisitions in recent years, and a notable one it announced back in September was the purchase of Interactions, which it calls "a pioneer in AI for customer service and workflow orchestration."

The company believes this move can strengthen its position in agentic AI. And that's a huge opportunity for SoundHound, as agentic AI can add tremendous value for people who are operating vehicles, giving voice commands that an AI can then address through a multistep process. This can enhance the AI experience for users, as it goes beyond just providing someone with information. Instead, it creates a virtual assistant that can carry out tasks such as making reservations, updating travel plans, or taking notes, among other things.

The agentic AI market is still in its very early innings. According to analysts at Grand View Research, the global enterprise agentic AI market was worth just under $2.6 billion in 2024. But by 2030, it could rise to $24.5 billion, growing at an impressive compounded annual growth rate of more than 46% over that time frame.

SoundHound also says the acquisition of Interactions will further broaden its customer base, potentially leading to more upselling and cross-selling opportunities along the way. The deal will cost SoundHound $60 million or more, depending on the achievement of milestones.

Why there's still a significant risk with SoundHound

Diversifying its business and getting deeper into agentic AI are all potentially great moves for SoundHound in the long run. But the problem is that, like with many things related to AI these days, investors may be looking for proof of a payoff. SoundHound has acquired multiple businesses within the past couple of years, but that hasn't led to a stronger bottom line.

In its most recent quarterly results, which ended on Sept. 30, the company's sales rose by 68% year over year, to more than $42 million. However, its net loss totaled $109.3 million, which was more than five times the $21.8 million loss it posted in the prior-year period. While acquisitions can easily boost a company's top line, it can take time to integrate businesses efficiently so that they improve overall profitability, which is of key importance to investors.

While the Interactions acquisition is promising, investors shouldn't assume that it will necessarily lead to an improvement in SoundHound's revenue and earnings.

Should you invest in SoundHound AI?

SoundHound has been leveraging acquisitions to further its business with the purchases of Amelia and SYNQ3 in the past, but without some clear evidence of strong organic growth or at least meaningful progress toward profitability, this will remain a highly speculative stock to own. The Interactions acquisition, although promising, may ultimately lead to the same pattern for SoundHound: strong revenue growth, but not necessarily a better bottom line.

Investors appear to be clearly thinking more carefully about SoundHound AI these days, whose hype and acquisitions haven't translated into strong results thus far. And until that changes, the safest option will be to take a wait-and-see approach with the AI stock.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends SoundHound AI. The Motley Fool has a disclosure policy.