The stock of SoundHound AI (NASDAQ: SOUN) has increased by almost 940% in the last 12 months. Investors were astounded by the voice and audio recognition tool developer’s rapid expansion and Nvidia’s backing, which boosted its ownership of the business and included its services into its own Drive platforms.
Outstanding Sales Growth
Sales of AoundHound AI grew 47% in 2022 and 2023, with a projection of 79% to 85% growth in 2024 and an expected 86%–110% revenue increase by 2025. The company’s AI-powered Houndify speech recognition services, utilized by fast food chains, smart TV manufacturers, and automakers, are fueling this growth due to its adaptability and data privacy features.
However, SoundHound AI is already trading at 49 times its 2025 sales, with a market valuation of $8.05 billion. Since going public through a merger with a special purpose acquisition company (SPAC) in April 2022, it has raised its number of outstanding shares by 88% through secondary offers and stock-based remuneration, although it is still not profitable.
Therefore, if SoundHound AI fails to live up to its own high standards, its shares might still be halved during the next two years.
Over the next two years, two more reasonably priced AI stocks, SentinelOne (NYSE: S) and Innodata (NASDAQ: INOD), may have a chance to surpass SoundHound AI’s market capitalisation and outperform it.
Data cleaning for AI applications
Large corporations frequently devote only 20% of their time to actually training their AI algorithms and 80% of their time to preparing their data when creating new AI applications. For businesses that must feed enormous volumes of data into their large language models (LLMs) and artificial intelligence (AI) services, that strategy is expensive and ineffective.
In 2018, Innodata introduced a set of task-specific microservices for data preparation for AI applications in an effort to remove that bottleneck. Innodata’s revenues increased at a consistent compound annual growth rate (CAGR) of 12% between 2019 and 2023, and five of the “Magnificent Seven” corporations swiftly chose those services to organise their AI-oriented data.
However, as the generative AI industry grows, its Magnificent Seven clients increase their spending, and it acquires more clients, analysts predict that Innodata’s revenue will grow at an even faster CAGR of 42% between 2023 and 2026. They also anticipate that it will become profitable this year and increase its profits per share (EPS) at a compound annual growth rate (CAGR) of 21% over the following two years.
For Innodata, which went public in 1993 and had spent the majority of its existence as a slow-growing provider of IT services and software, that would be a spectacular reversal. With a $1.2 billion market capitalisation, Innodata still appears to be fairly valued at less than six times next year’s revenues. If the market revalues it as a hypergrowth stock, it will undoubtedly have a chance to surpass SoundHound AI within the next two years.
Automation of Cybersecurity Services
The majority of cybersecurity firms still use human analysts to review their data and make algorithm updates. SentinelOne’s Singularity XDR (extended detection and response) platform, however, intends to replace all of those analysts with automated AI algorithms. It argues that streamlined method produces faster and more accurate outcomes. Both on-site and cloud-native services are used by SentinelOne to deploy its services.
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Its revenue more than doubled in fiscal 2021, fiscal 2022, and fiscal 2023 (which concluded in January 2023). It continued to acquire large clients, which bring in at least $100,000 in recurring income annually, and its dollar-based net revenue retention rate, which measures its growth per current client year over year, stayed well above 100%.
SentinelOne expects a 32% increase in sales in fiscal 2025, although its revenue only increased 47% in fiscal 2024 due to the macro headwinds that made it more difficult to get new contracts. It is anticipated to remain unprofitable for the foreseeable future and is up against fierce competition from more diverse cybersecurity firms.
Although that downturn alarmed investors, experts predict that once the macro climate improves once more, its sales will increase at a strong CAGR of 27% from fiscal 2024 to fiscal 2027. SentinelOne’s $7.2 billion market capitalisation is just seven times its sales from the previous year.It is therefore more fairly valued than SoundHound, and as its operations stabilise and it significantly reduces its losses, it may rise even further.
