Prediction: SoundHound AI Will Soar Over the Next 7 Years. Here's 1 Reason Why.

Prediction: SoundHound AI Will Soar Over the Next 7 Years. Here’s 1 Reason Why.

Is SoundHound AI the next big thing in tech? Check out the secret sauce in this AI expert’s recipe for success.

Anders Bylund

Anders Bylund is a Foolish Technology, Entertainment, and Cryptocurrency Specialist. Where these markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life. Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Follow Anders on X (née Twitter) and LinkedIn.

Published August 27, 2024 5:10 am EDT

There is one very simple reason I expect SoundHound AI (NASDAQ: SOUN) stock to beat the market over the next seven years. The company has a huge backlog of long-term contracts and other unfilled orders, just waiting to convert into cash-based revenues. Market makers seem to have missed this as-yet untapped source of future sales — and the average contract in SoundHound AI’s backlog pool is a seven-year deal.

The backlog was worth $723 million in the second quarter. That’s up from $682 million in the previous quarter and $339 million in the year-ago period. In the summer of 2023, the backlog was growing at a 20% annual rate. Now, the rate of year-over-year growth has accelerated to 113%. The company is busy securing new contracts.

Meanwhile, SoundHound AI has started to collect subscription fees and other revenues from previously dormant contracts. As a result, its revenues are skyrocketing right now:

SOUN Revenue (TTM) data by YCharts. TTM = trailing 12 months.

voice-recognition-talking-to-a-smartphone — Source: Getty Images

Where SoundHound AI’s customers are coming from

So far, most of SoundHound AI’s voice control sales rest on the twin pillars of automotive and restaurant customers.

Fiat, Chrysler, and Maserati parent Stellantis (NYSE: STLA) is rolling out SoundHound AI voice controls with ChatGPT integration across its brands in Europe and Japan these days. American installations shouldn’t be far behind.
Recent restaurant deals include popular fast-food chain White Castle, sandwich-slinger Jersey Mike’s, and sports bar chain Beef ‘O’ Brady’s. The names are getting familiar, and you might have already interacted with SoundHound AI’s computer-controlled voice ordering systems.
The company is making strategic buyouts in the artificial intelligence (AI) space for voice controls and e-commerce integration. These deals should firm up SoundHound AI’s grip on its core target industries while expanding its reach into new sectors.

This little AI expert is going places, and the revenue collection is just getting started. Keep an eye on SoundHound AI’s order backlog as it converts into a proper revenue stream over the next few years. As the company’s sales soar, the stock price should follow suit.