Will SoundHound be a top AI stock in 2026?

Soundhound AI (NASDAQ: SOUN) is a fairly popular artificial intelligence (AI) stock for its size. It is a relatively small company with a market capitalization of approximately $5 billion. However, these small businesses have the ability to grow quickly and potentially deliver explosive profits.

2025 hasn't been a great year, with SoundHound's stock price down about 15% over the year. However, as of October, the stock had risen about 40% for the year. This suggests extreme volatility for SoundHound stock, which is not surprising considering its size and popularity.

So, can it be revived in 2026? Let's find out.

SoundHound AI is pioneering important applications

SoundHound AI combines voice recognition technology with generative AI. This is an important application of AI, which could be used to automate human interactions that don't occur face-to-face. So far, one of the biggest use cases for the company's technology has been in the restaurant business, with many restaurateurs integrating the technology into their drive-thru windows.

Another area where SoundHound's products can provide great value is in any industry with a strong customer service department, such as healthcare, insurance, and financial services. If SoundHound can replace the thousands of customer service agents these companies employ, the product will be incredibly useful.

SoundHound is already seeing signs of global adoption of its product, as it announced that three of the world's top 10 financial institutions purchased additional services during the third quarter and signed a deal with a French insurance company.

SoundHound has found success in multiple industries, but the ultimate test is whether consumers will embrace it. Up until this point, robotic customer service agents weren't very helpful because they were set to follow a specific set of behaviors. Service agents powered by generative artificial intelligence should be able to offer more flexibility and have a more human-like aspect.

Still, customers must accept that they are not talking to a human on the other end of the phone. If you don't like this, SoundHound's clients could end up requiring a human operator instead of a generative AI agent for everyone they call. SoundHound AI's products have to be good enough to prevent this from happening, but it's a big concern.

But given all the money clients are spending on SoundHound AI, I think it can be a huge success if executed properly.

SoundHound AI is growing rapidly

SoundHound's third quarter revenue was $42 million, up 68% from the same period last year. This is not a large total, but its growth rate is impressive. Management believes the company can achieve organic growth of more than 50% in the “foreseeable” future, pointing to strong growth ahead. We'll see how long it can sustain its growth, but if SoundHound AI continues to grow at a 50%+ pace through 2026, I'd be surprised if the stock isn't a winner.

One factor that may hinder the company's success is its high reputation. Despite a strong year, SoundHound AI still outsold 34x.

SOUN PS ratio data by YCharts

Most software companies have 10-20x sales, but these companies aren't typically growing at 68%. I think this is a pretty fair valuation for SoundHound stock, and if it continues to see strong growth, it would be a fair valuation even at current levels.

One problem that SoundHound investors should be aware of is its severe unprofitability. Third quarter operating losses totaled $116 million on revenue of $42 million. That means almost triple the losses it caused. While this is a concern for many investors, I'm not too concerned because SoundHound is trying to gain market share in a very important market. If SoundHound's business is as successful as some think, these losses will be worth it. But there is still much work to be done.

Overall, I think SoundHound AI has the potential to do well in 2026, but its success will be tied to continued rapid growth rates and the market's risk appetite. If any of these things stall, SoundHound stock will be depressed in 2026.

Keithen Drury has no position in any stocks mentioned. The Motley Fool recommends SoundHound AI. The Motley Fool has a disclosure policy.