Are you looking for a profitable investment in artificial intelligence (AI)? Consider this AI stock that Nvidia is investing in.

Hitting an investing home run can be very satisfying because the returns can be incredible. But with home runs come strikeouts, and when you’re an all-or-nothing investor, strikeouts are much more common than home runs. Still, if the overall returns outweigh the massive losses, it can be a compelling investment strategy for those with the right stamina.

These days, some investors might be looking for artificial intelligence (AI) stocks with that potential for success, and I think I’ve identified one. AI SoundHound (NASDAQ:SOUN) has the assets for a potential home investment and is also supported by Nvidia (NASDAQ: NVDA)There is no better partner in AI.

Let’s see what might make SoundHound a top choice for those battling for the fences.

Its audio recognition technology thrives in two areas

SoundHound AI integrates AI with audio recognition. While this has multiple applications, the two areas where SoundHound has had the biggest impact are restaurants and automobiles. For restaurants, SoundHound automated drive-thru windows and took orders over the phone. Margins in the restaurant industry are notoriously thin, so if a restaurant can downsize using AI inexpensively, they will.

SoundHound’s audio recognition technology is integrated into digital assistants in the automotive industry. Hands-free technology has been around for over a decade, but it’s a clunky technology that doesn’t always work properly. SoundHound solves this problem and integrates generative AI technology into its product using ChatGPT.

However, this requires internet connectivity to work properly, which is why Nvidia and SoundHound have teamed up to integrate a large language model onto an integrated GPU that allows this model to work regardless of where the vehicle is located.

Overall, SoundHound offers a great value proposition to customers. However, some are concerned about the company’s financial situation.

SoundHound burns a lot of money

In the first quarter, SoundHound’s revenue increased 73% year over year to $11.6 million. While that’s an impressive overall number, $11.6 million isn’t a lot of revenue compared to most companies.

The problem with SoundHound’s finances is its burn rate, as the company is very unprofitable. Even though it generated $11.6 million in revenue, it posted an operating loss of $28.5 million, meaning it’s spending about 4 times more money than it’s bringing in. This is an unsustainable model, but that’s to be expected for a company that is still in the early stages of rolling out its products.

The story continues

SoundHound’s bright spot is its massive backlog. This metric sums up all the bookings it has coming in, which is no guarantee of revenue. But it does give an idea of ​​potential demand. If SoundHound converts its $682 million backlog into actual revenue, it will have had a massive success.

With such a large order book, SoundHound should have no problem raising additional funds by issuing shares in the public market, allowing it to maintain its unprofitable habits.

But does this all add up to a title worth exploring? Although the stock was trading at a much higher valuation during the initial AI hype cycle earlier this year, 20x sales remains expensive for the stock of a company that still has plenty work to be done before it is viable.

I still think there’s enough investment here to take a chance on SoundHound, but anyone buying the stock should be prepared to see their investment go to zero. If you have this ability, then this is a move worth considering, as it has a lot of potential. But remember to keep the position size very small, as a total loss is a possibility.

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Are you looking for an investment in artificial intelligence (AI) at home? Consider this AI stock that Nvidia is investing in. was originally published by The Motley Fool