Will SoundHound AI become the next Palantir?

In 2024, Palantir Technologies has become one of the brightest stars in the stock market. As of now, its stock price has risen by about 275%. Such amazing returns naturally attract numerous investors and prompt many to search for the next "Palantir", especially in the current hot field of artificial intelligence (AI). Recently, SoundHound AI has been considered as one of the stocks with similar potential. So, is it really possible for SoundHound AI to become the next Palantir?
From the company name, it is evident that the core business of SoundHound AI is closely related to 'sound'. The company has developed an AI-based speech recognition technology that can convert speech input into a data format usable by AI. This technology has been applied in multiple areas, such as the drive-thru windows of fast-food chains, in-car voice assistants, and banking services.
This is just the beginning, and one can imagine that accurate speech input has a great demand in various application scenarios of AI models, which also brings tremendous growth opportunities to SoundHound AI's business. In the third quarter of 2024, SoundHound AI achieved a revenue of $25 million, an 89% year-on-year growth. Although there is still a significant gap compared to Palantir's $0.725 billion revenue, as a company in its early stages, this growth trajectory is worth noting.
One of the attractive aspects of investing in SoundHound AI is its large order backlog. According to management, as of the third quarter, its potential revenue backlog has exceeded $1 billion and is expected to be gradually realized over the next six years. Although this number is not entirely certain, it reflects the huge potential for the company's future business expansion.
The company expects its revenue in 2025 to be between $0.155 billion and $0.175 billion, nearly twice the projected revenue for 2024 ($84 million). If this growth trajectory continues, SoundHound AI's revenue may continue to rise after 2025.
Furthermore, the company's diversification in revenue sources is progressing steadily. Last year, the automotive industry accounted for over 90% of its total revenue, but this proportion has now dropped to below 25%. At the same time, the revenue share of its largest customer has decreased from 72% last year to 12% this year. This industry and customer level diversification significantly reduces the company's operational risks. However, SoundHound AI is not without risks. Due to its high visibility, the market has a 'premium' on its valuation. Currently, SoundHound AI's PS ratio is as high as 38 times, although lower than Palantir's 58 times, it still falls into a high valuation range. High valuation means investors have very high expectations for future performance. If SoundHound AI can continue to maintain its annual revenue doubling growth rate, such valuation may gradually be justified. But if its business development falls short of expectations, like facing strong competitors or product development failures, the stock price may quickly decline.
Overall, SoundHound AI is expected to become a star AI stock in 2025, but it is a high-risk small to mid-cap stock with high volatility. For patient investors, SoundHound AI may not only become the next Palantir but also surpass it. However, investors should be cautious and control their positions when investing, to cope with potential risks. SoundHound AI's future is promising, but investors should also remember that 'high returns' often come with 'high risks'.

Step by step, here is an easy-to-understand piece about a good company, but after reading, let it go... I'm just rambling when I have time... No buying or selling advice here!!! Otherwise, the consequences are your responsibility 😎

Nonsense ahead, one step away