Nvidia (NVDA -3.00%) was a $360 billion company at the start of 2023, but just two years later, it's now worth a whopping $3.3 trillion.
Nvidia's graphics processors (GPUs) for data centers are the best in the world for developing artificial intelligence (AI) models, and they are the main driver behind the company's incredible growth. Over the past year or so, CEO Jensen Huang has been spreading some of Nvidia's wealth by investing in other AI stocks.
Image source: Nvidia.
The six stocks Nvidia bought
Nvidia first started investing in AI stocks at the end of 2023. According to the company's latest 13-F filing with the Securities and Exchange Commission (SEC) from November 2024, these are the six names it currently holds:
- Applied Digital Corp, which designs and builds data centers for customers.
- Arm Holdings, which helps tech companies design advanced computing chips.
- Nano-X Imaging, which uses AI to improve medical imaging.
- Recursion Pharmaceuticals, which uses AI to aid in the drug discovery process.
- Serve Robotics, which develops autonomous last-mile delivery solutions.
- SoundHound AI (SOUN -6.19%), which is a leader in conversational AI.
SoundHound AI stock was the top performer on that list in 2024, with a massive gain of 835%. But it's off to a very rocky start to 2025 -- last week (ended Friday, Jan. 10), it plunged by 32% as investors trimmed their bets on stocks with elevated valuations.
Will this be the ultimate opportunity to buy SoundHound stock?
A conversational AI powerhouse
Conversational AI is designed to understand voice-based prompts and respond in kind. SoundHound is a leading developer of the technology, and it currently has customers in the quick-service restaurant industry, the hospitality industry, and even the automotive industry.
However, SoundHound acquired another conversational AI company called Amelia last year, which is expanding its reach into new industries like financial services, insurance, and healthcare, so it's becoming a true powerhouse in this emerging space.
SoundHound's applications are live in over 10,000 restaurant locations, where they automate drive-thru ordering, phone ordering, and in-store ordering. Plus, adoption is growing for the company's Employee Assist software, which can provide workers with immediate information about menu items or store policies on command. It's basically a virtual assistant they can speak to at any time during their shift.
Chipotle, White Castle, Applebee's, and Panda Express are just some of the top restaurant chains using SoundHound's technology.
SoundHound's Chat AI software is also finding its way into several new cars from leading manufacturers like Stellantis (Chrysler, Jeep, and Dodge), Mercedes-Benz, and Hyundai. It's a powerful voice assistant which can give the driver information on everything from the weather to sports scores.
At the CES 2025 technology conference last week, SoundHound also unveiled the world's first in-vehicle voice commerce platform. Drivers can ask their voice assistant to place a takeout order from a local restaurant, with no phone call required. It even syncs with the vehicle's GPS navigation system, so if you're hungry on the way home from work, your food will be hot and ready the moment you arrive at the restaurant to pick it up.
SoundHound's revenue is poised to soar in 2025
SoundHound hasn't reported its financial results for the final quarter of 2024 just yet. However, the company's guidance suggests it could deliver up to $85 million in total revenue for the year. That would represent growth of 85% compared to 2023, and it would also be a record high.
The inclusion of Amelia's revenue in 2024 is a key reason for the strong growth. Plus, in the third quarter (ended Sept. 30), SoundHound told investors that five different industries represented between 5% and 25% of its total revenue, whereas in the prior-year period, 90% of its revenue came from the automotive sector alone. That highlights how much the Amelia acquisition helped SoundHound diversify its business.
2025 could be SoundHound's biggest year so far. Before it even started, the company told investors it could deliver up to $175 million in revenue, which would represent accelerated growth of 105% compared to 2024.
SoundHound also ended Q3 with a record order backlog worth a whopping $1 billion, which it expects to convert into revenue over the next six years. In other words, it has a huge demand pipeline which should support its growth even beyond 2025.
SoundHound stock plunged last week, but should you buy the dip?
SoundHound stock recently peaked at around $24.23, which valued the company at $9 billion. Based on its trailing 12-month revenue, the stock was trading at a staggering price-to-sales (P/S) ratio of over 100 which was completely unsustainable.
Even after its 32% dip last week, SoundHound's P/S ratio is still around 64, which is more than twice the P/S ratio of Nvidia!
SOUN PS Ratio data by YCharts
Nvidia is one of the highest quality companies in the world with powerful revenue growth, soaring profits, a leadership position in AI hardware, and a decades-long track record of success. It doesn't make much sense for SoundHound stock to trade at such a hefty premium (or any premium at all) to Nvidia stock.
Even if we measure SoundHound's P/S ratio on a forward basis using its forecasted 2025 revenue of $175 million, its P/S ratio is still around 30. By comparison, Nvidia's forward P/S ratio is just 17, so I think SoundHound stock is still way too expensive.
I'm not suggesting SoundHound stock needs to plunge further. It could trade sideways for the next few months until investors learn more about its revenue outlook for 2025, and potentially even 2026. However, it's very difficult to recommend buying the stock at the current price, because it's unquestionably overvalued when we use the best AI stock in the world as a benchmark (Nvidia).
