This quiet AI company could be the next big winner

The dramatic rise in tech stocks over the past two years has made many investors richer. This is something to celebrate. But when the work is done, I pat myself on the back for a job well done. Nvidia, alphabetand Palantir Technologiesit's time to look for the next big thing.

It's easier to make dramatic profits if you start with a small market capitalization. When I first bought the stock in 2022, Palantir's market cap was less than $50 billion, and its current market cap is $431 billion, making it one of the largest companies in the world.

The company's stock price has increased 2,210% since July 2022. And if it were to rise another 2,210% over the next three years, it would have a market capitalization of $10 trillion, more than double that of current market leader Nvidia.

Obviously, that's not happening. To find artificial intelligence (AI) stocks with Palantir-sized upside potential over the next three years, you need to consider stocks that are poised to continue to grow significantly. One of the stocks I'm currently considering is one I've been skeptical of in the past. Soundhound AI (Thorn +1.19%).

What is SoundHound AI?

SoundHound operates an AI platform that enables users to have conversations and use voice-enabled services and apps. Voice-enabled products have been around for a long time, including automated customer service phone numbers and voice assistants like Siri and Alexa. However, early versions of this technology were clunky enough to cause significant user frustration.

SoundHound, which went public in 2021 and operates primarily in the automotive and restaurant industries, took a big step in 2024 with the $80 million acquisition of Amelia AI, an AI agent that can be customized for internal use or public-facing applications.

This acquisition expands SoundHound's corporate customer base to more than 200 customers. However, the company still hasn't been able to turn a profit, and investors may be starting to worry about the stock this year. The stock price has fallen more than 40% this year.

Today's changes

(1.19%) $0.13

current price

$11.02

Key data points

Market capitalization

$4.6 billion

daily range

$10.81 – $11.16

52 week range

$6.52 – $24.98

volume

24M

average volume

41M

gross profit

February 30th%

Part of the problem may be that the company's third-quarter earnings report showed a significant net loss of $109.3 million, compared to a net loss of $21.7 million a year ago. The loss wiped out an impressive $42 million in revenue, which was up 68% year-over-year.

However, $66 million of the loss was due to non-cash non-operating accounting charges related to prior acquisitions. Adjusted net loss was $13 million, an improvement over the prior year. Most importantly, the business ended the quarter with zero debt and $269 million in cash on hand.

Additionally, SoundHound is growing its client base in the following ways:

• A deal to integrate SoundHound Chat AI into “two-digit millions of AI-enabled smart devices” developed by an anonymous Chinese company.
• Signed an agreement with an Italian commercial vehicle company to introduce voice AI to its vehicles.
• Expanded scope of contracts with three major financial institutions.
• Agreement with a U.S. community hospital system to implement the Amelia platform.
• Agreement to supply voice ordering technology to a national full-service restaurant chain.
• Contracts with telecommunications providers to provide television and Internet in 20 states.

What should you expect from the stock?

Yahoo! conducted an analyst survey. Financial experts agree that Soundhound stock will rise next year. The average price target of $17.19 is 53% higher than the current share price. The minimum price target of $15 is 33% higher.

While SoundHound may not replicate Palantir's rapid growth, I see many similarities between the two companies. Three years ago, in the second quarter of 2022, Palantir also lost money, posting a net loss of $179.3 million in the same quarter when it was building its platform.

Management expanded SoundHound's business model to include a variety of functions such as customer service, sales, marketing, operations, and IT service management. The company has enabled more than 10 billion personalized automated voice conversations annually.

SoundHound AI's growth is expected to continue as companies seek to improve efficiency and increasingly rely on AI solutions to streamline products while personalizing customer interactions. Clearly, I misjudged this company with my aforementioned skepticism. Because I think the stock price will skyrocket over the next few years as quarterly losses start turning into profits.