Is SoundHound AI Inc (NASDAQ:SOUN) the best cheap AI stock after recent acquisitions?

We recently published a list 11 Most Popular AI Stocks in Latest News and Analyst RatingsWith SoundHound AI Inc (NASDAQ:SOUN) ranking 11th on the list, it’s worth taking a closer look.

Investors remain cautious after a large global sell-off rocked markets last week amid recession fears. Analyst warnings about sky-high tech companies’ capital expenditures (CapEx) and a lack of transparency on returns should also keep tech valuations in check in the coming weeks.

Last month, Roger McNamee of Elevation Partners, in an interview with CNBC, highlighted a Goldman Sachs report that showed that returns from AI investments may not meet investor expectations.

“The amount of capital investment in this sector, now in the billions of dollars, is so large that it is almost impossible to imagine that we will see a rate of return in the next few years that justifies the size of the investment,” McNamee said.

In an interview with Bloomberg, JPMorgan Asset Management’s Aisa Ogoshi said there will be some “correction” in tech stocks as she expects the AI-focused rally to spread to other sectors.

“The key is to track earnings trends. It’s easy to panic these days, but really, just sit back, look at the numbers and reassess where you’re positioning.”

Asked if she plans to reduce her exposure to AI stocks in the coming days, the analyst said she will be more “selective” with AI-related stocks and increase the quality of stocks in the portfolio.

In this article, we’ve selected 11 popular AI stocks based on the latest news, earnings, and analyst ratings. We’ve included the number of hedge fund investors for each stock. Why are we interested in stocks that hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of top hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

SoundHound AI Inc (NASDAQ:SOUN)

Number of hedge fund investors: 15

SoundHound AI Inc (NASDAQ:SOUN) recently announced that it would acquire AI startup Amelia AI for $80 million. Amelia creates an AI agent that customizes companies to their needs. The company’s clients include BNP Paribas, pharmaceutical company Teva, and Fujitsu. With projected revenue in 2024 at $80 million, SoundHound AI Inc (NASDAQ:SOUN) now expects revenue in excess of $150 million in 2025, with Amelia contributing $45 million in recurring revenue from AI software and related fees.

SoundHound AI Inc (NASDAQ:SOUN) is expanding its arsenal of solutions to expand its reach. In June, the company acquired Allset, an ordering platform for restaurants. Last year, it bought SYNQ3, which provides conversational AI ordering solutions for restaurants, for $25 million.

Cantor Fitzgerald raised SoundHound AI from Neutral to Overweight following news of the Amelia deal. Analyst Brett Knoblauch called the deal potentially transformational and raised his price objective for SoundHound from $5 to $7.

SoundHound AI Inc (NASDAQ:SOUN) AI has strong secular growth catalysts as companies around the world adopt AI voice solutions to reduce costs and increase efficiency. While telephone conversation regarding financial results in May SoundHound AI Inc (NASDAQ:SOUN) spoke about the potential of its AI solutions in customer service:

Last year, we expanded our AI customer service offering beyond restaurants with Smart Answering, a product that handles multiple calls simultaneously 24/7, conveniently filtering spam calls, responding verbally and text messages, taking custom actions, capturing leads with smart messages, and answering questions about policies, hours, products, services, pricing, and more. Smart Answering is growing rapidly in Pillar 2, with hundreds of locations already signed up, from small businesses with one location to brands like Planet Fitness. We estimate our total Pillar 2 addressable market (AI customer solutions services business) to be over $100 billion, with over 1 million restaurants and approximately 30 million businesses in North America alone that we can offer our solutions to. And with the dozens of languages we already offer to our Pillar 1 customers, we plan to expand internationally in Pillar 2 as well. With large language models and generative AI, and most importantly, data science and machine learning behind our proprietary software, we believe the time has come.

Overall, SoundHound AI Inc (NASDAQ:SOUN) ranks 11th on Insider Monkey’s list titled 11 Most Popular AI Stocks in Latest News and Analyst Ratings. While we recognize the potential of SoundHound AI Inc (NASDAQ:SOUN), our belief is based on the belief that AI stocks offer a better chance of achieving higher returns in a shorter time frame. If you are looking for an AI stock that is more promising than SOUN but is trading at less than 5 times earnings, check out our report on cheapest AI action.