Why SoundHound AI Stock Skyrocketed This Week
SoundHound AI (NASDAQ: SOUN) stock surged higher in this week's trading. The company's share price closed out this week up 48% from last Friday's market close, according to data from S&P Global Market Intelligence.
Automaker Stellantis expanded its integration of SoundHound's voice-based artificial intelligence (AI) technologies in Europe this week. The development could be a significant sales driver for the voice-interface software specialist, and investors have poured into the stock in response.
SoundHound's expansion revs up in Europe
With an update released this week, Stellantis made SoundHound's voice-based operating system available in compatible Peugeot, Opel, and Vauxhall vehicles and will now include the technology with new vehicles from these brands. The software incorporates OpenAI's ChatGPT chatbot and was launched for these brands in Germany, France, the U.K., Italy, and seven other European markets.
By the end of July, SoundHound integration is expected to have been launched for Peugeot, Opel, and Vauxhall vehicles in a total of 17 European markets. The expanded debut follows the production integration for Stellantis' high-performance DS Automobiles brand in March.
In addition to these units, the auto conglomerate also houses businesses including Chrysler, Dodge, Fiat, and Jeep. It's possible that other automakers under Stellantis' umbrella could move to incorporate technologies from SoundHound in the not-too-distant future.
What comes next for SoundHound AI stock?
After this this week's explosive gains, SoundHound's market cap has been pushed above the $2 billion mark again. On the other hand, the company's stock is still down roughly 30.5% from the 52-week high that it reached earlier this year.
SOUN PS Ratio (Forward) data by YCharts
SoundHound stock has been highly volatile amid a surge of excitement surrounding AI and uncertainty about the company's long-term sales outlook. After surging roughly 192% across 2024's trading, SoundHound is now trading at roughly 29 times this year's expected sales.
With its last quarterly report, SoundHound delivered 73% year-over-year sales growth. The business is showing some impressive momentum, but sales were still relatively small -- coming in at $11.6 million in the period. The software specialist also posted a net loss of $33 million in the quarter.
The company appears to be landing and expanding significant partnerships, but it remains to be seen whether the company can carve out a defensible moat and stave off competitive pressures. Given SoundHound AI's valuation profile and speculative outlook, it's likely that the stock will continue to be highly volatile in the near term.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
