Nvidia gives a nod, but be cautious: SoundHound (NASDAQ:SOUN) shines.

TLDR: SoundHound (NASDAQ:SOUN): Nvidia Just Blessed This AI Stock, But be Careful

A juggernaut among AI hardware companies invested in SoundHound AI, so that’s definitely a positive sign. Still, after the sharp rally in SOUN stock, it’s wise to do your due diligence instead of immediately investing in SoundHound AI.

It’s certainly notable that a kingmaker in the artificial intelligence (AI) hardware industry, Nvidia (NASDAQ:NVDA), recently disclosed an investment in SoundHound AI (NASDAQ:SOUN). Yet, after a swift vertical price move, I am neutral on SOUN stock and will choose to stay out of the way.

SoundHound AI provides voice artificial intelligence (AI) platforms that enable businesses to deliver conversational experiences to their customers. For example, the company recently introduced a conversational AI product specifically for restaurant employees. It’s a fascinating little company, and it’s now trending on the Nvidia news.

Nvidia Invests in SoundHound

So, here’s the big news in more detail. A 13-F filing revealed that Nvidia (NASDAQ:NVDA), the juggernaut AI hardware manufacturer, bought shares of SoundHound AI. To be more specific, at the end of last year, Nvidia reportedly held 1.73 million shares of SoundHound, valued at nearly $3.67 million at that time. This speaks volumes, of course, since Nvidia is truly a kingmaker among AI-focused companies in 2024.

From a financial standpoint, SoundHound AI, unfortunately, isn’t a profitable company. However, SoundHound AI did manage to narrow its quarterly loss from $30.061 million in 2022’s third quarter to $20.197 million in the third quarter of 2023. Regarding Nvidia’s stake, Wedbush Securities analyst Dan Ives remarked, “We view this as a positive indicator for [SoundHound] as this investment now further solidifies the company’s brand within the AI Revolution.” That’s a reasonable assessment, but after today’s 66.7% share-price rally, sensible investors might be uncomfortable buying SOUN stock.

Is SOUN Stock a Buy, According to Analysts?

On TipRanks, SOUN comes in as a Strong Buy based on three unanimous Buy ratings assigned by analysts in the past three months. The average SoundHound AI price target is $4.67, implying 24.2% upside potential. If you’re wondering which analyst you should follow if you want to buy and sell SOUN stock, the most accurate analyst covering the stock (on a one-year timeframe) is Michael Latimore of Northland Securities, with an average return of 12.64% per rating and a 71% success rate.

Conclusion: Should You Consider SOUN Stock?

It’s a huge win for SoundHound AI, of course, to have the almighty Nvidia as a shareholder. On the other hand, the market went bananas today and panic bought SOUN stock. Therefore, cautious investors should probably think about letting the stock cool off for a while before considering buying it.