Why SoundHound AI Stock Jumped 20% on Thursday

Shares SoundHound AI (SOUND 21.16%) took off like a rocket this morning, rising as much as 21.9%. When the market closed on Thursday, the stock was up 21.7%.

The catalyst that propelled the artificial intelligence (AI) specialist to the top was a strategic acquisition to expand its reach in the customer service industry.

Amelia AI

SoundHound AI announced that it has acquired enterprise AI software company Amelia to expand its reach in conversational AI. The company cited AI expertise, complementary product offerings, and proprietary technology as giving the newly combined company “a distinct competitive advantage in the emerging conversational AI space.” The press release also cited vertical expansion into large addressable markets and customer base diversification as factors driving its decision.

Amelia “offers enterprise AI solutions that are purpose-built to drive real business outcomes,” according to its website. Its conversational AI focuses primarily on customer service and employee support. Amelia has offerings that span multiple vertical industries, including financial institutions, healthcare, insurance, telecommunications, and travel. Its enterprise AI solutions “create fast, personalized, and efficient experiences that build loyalty and trust with every engagement.”

SoundHound is paying $80 million in cash and stock and assuming Amelia’s debt, as well as potential future earnings potential. SoundHound said it expects the combined company to have revenue of more than $150 million in 2025, including $45 million in recurring sales of AI software from Amelia, and to grow earnings in the second half of next year. The company also expects significant revenue and cost synergies, as well as multiple cross-selling and upselling opportunities.

It’s also worth noting that Amelia had $160 million in cash and $39 million in debt, so at first glance it might seem like SoundHound bought the company for next to nothing.

Acquisitions are always unpredictable, but investors clearly appreciated this deal and have been bidding on SoundHound AI shares in the meantime.