This week marks the next earnings report for another artificial intelligence (AI) sensation. No, not Nvidia (NASDAQ:NVDA). This company is significantly smaller, but it is one of Nvidia’s investments: Soundhound AI (NASDAQ:SOUN). SOUN stock has rocketed out of penny stock territory over the past five days, surging by almost 95%.
Now, it is gearing up to report fourth-quarter 2023 earnings on Feb. 29, and SOUN stock is rising in anticipation. For investors, the prospect of being able to invest like Nvidia provides a tempting opportunity, especially as SoundHound is still trading at low levels. The upcoming earnings report will do much to determine if its winning streak will continue. If key metrics come in at or above analyst estimates, SOUN will likely be among the year’s AI breakout sensations.
Does this mean that investors should be loading up on SOUN stock before the Q4 earnings call in two days? Let’s take a closer look at SoundHound AI and assess what the report is likely to mean for the company’s growth prospects.
Is SOUN Stock a Pre-Earnings Buy?
When a penny stock catches this type of momentum quickly, it’s hard not to be skeptical. Surging by almost 100% in a week is often a sign of a meme stock blitz, something that investors should be wary of.
However, in the case of SOUN stock, things might be different. Yes, the company offers investors exposure to the booming AI industry, but it operates in an interesting niche that gives it a strong edge. Voice and speech recognition technology is a fast-growing market that isn’t likely to slow down. SoundHound has found a way to revolutionize the space through AI, offering investors a truly inciting way of profiting off two booming industries.
On top of that, the significance of Nvidia’s investment in SoundHound cannot be overstated. The leader of the AI sector clearly sees strong potential in the small company and wants to be there as it continues to gain a share of their market. InvestorPlace contributor Muslim Farooque recently laid out just how important this endorsement is likely to be. In his words:
“Regardless of the size of the investment, Nvidia strongly suggests the company’s belief in SoundHound AI’s leadership in the emergent conversational AI space. SoundHood has grown its top line at a rapid pace, delivering a massive 43% YOY growth, outpacing analyst estimates in the past couple of quarters. Furthermore, estimates suggest that the global conversational AI market size could grow by 23.6% from 2023 to 2030, reaching $41.4 billion by 2030. Such a massive total addressable market is a testament to SOUN stock’s long-term growth potential.”
Now, SoundHound is poised to continue rising as the next earnings report draws near. The number to beat is $17.75 million, the average analysts’ estimate for the quarter. Since SoundHound has provided a Q4 revenue guidance estimate that ranges between $16 and $20 million, finishing above the average prediction seems highly doable. It also bodes well that the company’s adjusted EBITDA is expected to be positive as well.
As Feb. 29 approaches, SOUN stock will likely keep rising. Anticipation is high as more and more experts take notice of the surging AI stock. To reach new heights, all SoundHound needs to do is finish above estimates, which it seems well-positioned to do.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
