Picking the top-performing artificial intelligence (AI) stock a year out isn’t easy. In 2023, it ended up being Nvidia. In 2024, all signs are pointing toward Palantir Technologies. This shift from AI hardware to AI application software was predictable because it has to be deployed and become useful at some time for all of the investment dollars in hardware to pay off.
As a result, I think we’ll see another AI software company rise to the top in 2025. My prediction is that it will be SoundHound AI (NASDAQ: SOUN), even though it has already had an incredibly strong 2024, rising over 300%. So, how can a company that has already risen so much be a top pick for 2025?
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SoundHound AI’s platform is centered around taking a voice input and turning it into a prompt for an AI platform. This has multiple uses, including automaking, restaurants, financial services, insurance, and healthcare. The company already has products serving those industries, and automakers and restaurants are some of its largest clients.
Still, the company has become quite diversified in 2024. During last year’s third quarter, 72% of revenue came from one client, and 90% of total revenue came from the automotive sector. Now, the largest client contributed only 12% of revenue, and the largest sector made up 25% of revenue.
That diversification is a key part of SoundHound becoming more relevant in all industries and turning into a more stable company. If that single client left in late 2023, it might have caused the business to go belly up. If its largest client leaves now, it will still hurt, but not as much as it would have before.
While SoundHound still has risks associated with it, this plays a huge part in lowering that risk level.
In the third quarter, revenue grew 89% year over year to $25.1 million. This makes it a small-cap stock, as its revenue in the past 12 months totals $67 million. For other, more established software companies, that would be a fairly small percentage of overall revenue, but the company isn’t expected to stay there for long.
Management projects 2025 revenue will come in between $155 million and $175 million, which is nearly double the revenue it projects for 2024. Clearly, SoundHound expects its business to maintain its boom for 2025.
This also highlights a key investment point: How high is the limit if its products become the industry standard in audio recognition? Think of all the ways we use voice to control what we do; now, imagine that being associated with the power of AI. SoundHound could become a huge winner in this space, even after it has run up so much.
