Nvidia (NASDAQ: NVDA) has clearly been one of the top performers on the market in recent years. The chip designer has risen 2,600% in the past five years and this year the stock is heading for a gain of 148%. The reason for such momentum? Nvidia not only dominates the artificial intelligence (AI) chip market, with an 80% share, but has also built an AI empire. The company offers a wide range of products and services – from enterprise software to networking solutions – to meet the needs of every AI customer.
All this has translated into outsized earnings growth, with revenues and profits rising by triple digits quarter after quarter – and margins exceeding 70%. There’s also reason to be optimistic about Nvidia continuing these achievements, as the company has put a focus on innovation and promises to update its chips once a year.
So Nvidia certainly has more fuel in the tank to grow its stock gains. But despite all this, another AI stock is gaining on Nvidia this year when it comes to performance. If this continues, this stock could be the biggest winner of 2024. Let’s find out more about this fast-growing AI stock that may outperform market star Nvidia this year.
An expert in AI voice assistants
This player is not competing with Nvidia, but rather operating in a different but promising area of AI: AI-powered conversational voice assistants. I’m talking about SoundHound AI (NASDAQ: SOUND). The company differentiates itself with its patented speech-to-meaning technology, where the platform understands speech as it happens, without having to convert that speech into text first. This results in faster, higher quality results and makes users feel like they are having a natural conversation.
And SoundHound’s expertise is protected by a solid portfolio of patents, of which approximately 155 have been issued and 115 are pending.
SoundHound is already conquering several markets, including automotive, restaurants and customer service. For example, consider ordering food or communicating with your car. The company wants to expand into other sectors, such as financial services and healthcare. All this represents a total addressable market of $140 billion.
Speaking of healthcare, SoundHound recently made an acquisition, acquiring conversational AI player Amelia – a move that should expand its reach in healthcare and other markets.
In fact, SoundHound says the purchase “vastly” expands the company’s addressable markets, and the combined company now has 200 “major” customers. A few weeks after the purchase, SoundHound released news of its expanded operations, saying MUSC Health had implemented an Amelia tool to help patients manage their appointments 24/7.
SoundHound’s focus on growth
How does this translate into profit? Well, SoundHound isn’t profitable yet, but that’s not shocking for a company at this stage in its growth story. Now is the time to invest heavily in research and development (R&D) to secure market leadership, and in marketing to grow the customer base. Both numbers are on the rise, with R&D up 34% year-over-year in the most recent quarter and marketing spend up 11%.
And other statistics look very encouraging. For example, quarterly revenue rose 54% to $13.5 million, and cumulative subscriptions and bookings backlog doubled year over year to $723 million. SoundHound is also receiving more and more inquiries about its services, showing that it is attracting the attention of potential customers. It has now reached an annual run rate of 5 billion searches.
This AI voting giant also has a strong cash position of more than $200 million and has made progress in paying down debt – signs that it has the financial structure to support growth.
Now let’s get back to the topic of stock performance. Today, SoundHound is heading for a 121% increase this year, still behind Nvidia – but not by much. If the AI chip giant’s stock stagnates or slides a bit and SoundHound gains momentum, possibly on the back of additional contract wins or other positive news, SoundHound could take a step forward.
Given year-to-date earnings and stock performance, both companies are likely to have great performances this year; they are almost on their way to the finish line. But the year is not over yet. And SoundHound may have what it takes to take the crown of biggest winner in 2024.
Should you invest $1,000 in SoundHound AI now?
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
This Artificial Intelligence (AI) Stock Could Be the Biggest Gainer of 2024 (Hint: It’s Not Nvidia) was originally published by The Motley Fool