Choosing the top performing artificial intelligence (AI) stock a year from now is not easy. In 2023, it ended up being Nvidia. In 2024, all signs point to Palantir Technologies. This shift from AI hardware to AI application software was predictable because it must be deployed and become useful at some point for all hardware investments to be profitable.
As a result, I think we will see another AI software company rise to the top in 2025. My prediction is that this will be the case. AI SoundHound (NASDAQ:SON)although it has already had an incredibly strong year in 2024, with an increase of more than 300%. So how can a company that has already progressed so much be a top pick for 2025?
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The SoundHound AI platform is centered around taking voice input and turning it into a prompt for an AI platform. This has multiple uses, including automobile manufacturing, restaurants, financial services, insurance and healthcare. The company already offers products aimed at these industries, and automakers and restaurants are among its biggest customers.
Still, the company has become quite diversified in 2024. During the third quarter of last year, 72% of revenue came from a single customer and 90% of total revenue came from the automotive sector. Now the largest customer accounted for only 12% of revenue, and the largest sector accounted for 25% of revenue.
This diversification is a key part of SoundHound becoming more relevant across industries and becoming a more stable company. If this single customer left at the end of 2023, it could have caused the company to go bankrupt. If his biggest client leaves now, it will still hurt him, but not as much as before.
Although SoundHound always carries risks, this plays an important role in reducing that level of risk.
In the third quarter, revenue increased 89% year over year to $25.1 million. This makes it a small-cap stock, as its turnover over the last 12 months is $67 million. For other, more established software companies, this would only represent a fairly small percentage of overall revenue, but the company is not expected to stay there for long.
Management projects revenue for 2025 to be between $155 million and $175 million, nearly double the revenue forecast for 2024. Clearly, SoundHound expects its business to maintain its boom for 2025.
This also highlights a key investment point: How high will it be if its products become the industry standard for audio recognition? Think about all the ways we use voice to control what we do; now imagine that combined with the power of AI. SoundHound could become a big winner in this area, even after experiencing so much success.
