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Artificial intelligence (AI) has been a big player in lifting up markets for almost two years, and now it's making waves across various industries. The global generative AI market is projected to exceed $1 trillion by 2032, with the speech and voice recognition segment alone expected to grow to $84.97 billion by 2032.

One small-cap AI player, Soundhound AI (SOUN) - which offers voice AI and speech recognition software to empower businesses to create top-notch conversational experiences for customers – is particularly well-positioned to benefit from the burgeoning industry.

Soundhound stock has surged in 2024, supported by developments such as Nvidia’s (NVDA) $3.7 million investment, disclosed in a 13F filing on Feb. 14.

Despite pulling back by a steep 65% from its 52-week highs, shares of Soundhound have still returned 67% on a YTD basis, outpacing the S&P 500 Index's ($SPX) 4.5% returns. Like many other AI names, this massive rally has ignited worries about its overvaluation.

About Soundhound AI Stock

Headquartered in Santa Clara, Soundhound AI, Inc. (SOUN), with a market capitalization of $1.2 billion, delivers exceptional conversational experiences through its innovative Houndify platform and suite of AI-powered tools.

Shares of Soundhound have surged 28.6% over the past 52 weeks, outpacing the SPX's 19.3% rise.

Priced at 26.68 times sales, Soundhound appears to be expensive at current levels.

Soundhound Slides After Q4 Earnings

Soundhound shares fell about 18% on March 1 as investors reacted to its Q4 2023 results. Its revenue increased by 80% year over year to $17.1 million, as cumulative subscriptions and bookings backlog (revenue to be recognized in the future) doubled to $661 million from the year-ago quarter.

That said, Soundhound is yet to be profitable. It is striving to trim its GAAP net losses, which decreased from $0.15 to $0.07 in Q4.

More critically for investors, management pushed back its forecast for profitability by one year, projecting revenue to be around $70 million in fiscal 2024 and to achieve positive adjusted EBITDA by 2025, with revenue potentially exceeding $100 million.

Analysts tracking Soundhound predict its revenue will grow by 51.5% year over year to $69.5 million in 2024, while GAAP losses are projected to narrow to $0.30 per share in fiscal 2024 and $0.21 in fiscal 2025 from $0.40 in 2023.

What Do Analysts Expect for Soundhound Stock?

Soundhound stock has a consensus "Moderate Buy" rating overall. Out of six analysts covering SOUN stock, four recommend "Strong Buy," and two suggest "Hold."

The average analyst price target for Soundhound is $7.15, indicating a 101% upside potential from the current levels. The Street-high target price of $9.50, assigned by DA Davidson in March, suggests a 167% upside potential.

Analysts at Cantor Fitzgerald recently upgraded Soundhound stock from an “Underweight” rating to “Neutral,” maintaining the price target at $4.90.

The analysts wrote in a research note, “When we downgraded shares on [March 21], we thought downside risk far outweighed upside risks. Now, we believe both downside risk and upside risk are more even which, in our view, warrants a change to our rating” - suggesting the recent SOUN pullback has made some experts more constructive on the stock going forward.

On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.