Discover the High-Potential Growth Stock That May Lead You to Millionaire Status

Every once in a while, the perfect company aligns with the right market conditions and offers an innovative product that captures attention.

For many investors, starting with a significant sum of money isn't feasible. If your goal is to become a millionaire, you'll likely have to build your wealth gradually, by investing small amounts over time, utilizing any extra income you have after covering essential expenses.

You may already recognize that investing in stocks is a critical way to keep up with or surpass inflation. Historically, the average annual return of the S&P 500 is around 10%.

But what if you could further elevate your investment strategy with a growth stock that might potentially outperform the broader market? While these stocks usually come with higher risks, the potential for greater rewards can justify that risk.

One notable candidate in this realm is an artificial intelligence (AI) company called SoundHound AI (SOUN 17.48%). After experiencing a significant 60% decline from its peak in December, this stock has caught the eye of savvy investors.

Understanding SoundHound AI

Are you unfamiliar with SoundHound? It's not surprising, as it lacks the visibility of giants like Nvidia or Microsoft. With a current market capitalization of about $3.8 billion, SoundHound operates under the radar. However, you might have used its technology without even realizing it.

SoundHound specializes in transforming spoken words into actionable digital information. Its technology streamlines fast food drive-thru orders, enables voice-activated commands in cars, and creates smart homes that respond to spoken instructions.

Brands like Honda, fast food chain White Castle, and music streaming service Pandora are leveraging SoundHound's innovative solutions, and this list continues to grow.

Although voice recognition isn’t a brand-new concept—having been used since the '90s—it was often clunky and frustrating. The recent advancements in AI and large language models have allowed the concept to finally reach its potential.

Market research indicates that the global voice and speech recognition technology industry is projected to grow at an average annual rate of 17% through 2033.

Recently released data revealed that SoundHound's revenue soared by an impressive 85% to $84.7 million for 2024, with expectations to double that figure in the upcoming year. While growth may cool as supply aligns with soaring demand, the company is poised to capture a significant share of the industry's expansion.

Gaining Insight Amidst Market Noise

This optimistic backdrop raises an important question: why have SoundHound's shares plummeted approximately 60% from their December peak?

To understand this decline, it’s critical to look back to last October. This was when investors discovered the company and quickly became excited about its potential, turning it into a bit of a meme stock, which intensified interest.

As is often the case, after an initial explosive rally, the stock began to retreat. A recent announcement from Nvidia, which sold its holdings in SoundHound, further unnerved the market and investors. The subsequent sell-off created a self-fulfilling cycle, particularly as concerns mounted regarding the company's quarterly performance report, which, in hindsight, were unfounded.

This kind of price volatility isn’t unusual for a high-flying tech stock; many pre-profitable tech companies experience these dramatic swings fueled by initial hype and the fear of missing out (FOMO).

The silver lining is that stories like SoundHound's usually only experience this pattern once. While future volatility is inevitable, investors are likely to price SoundHound's stock more rationally moving forward based on actual performance.

It’s also worth noting that Nvidia's decision to cash out may have been influenced by a desire to secure substantial profits. Nevertheless, analysts have remained bullish, with most rating the stock as a buy. The consensus price target stands at $14.06, indicating an expected increase of over 50% from the current stock price.

Prepare for Fluctuations

The recent fluctuations following SoundHound's quarterly results present a tricky situation. While investors prefer lower prices, it's unlikely this particular stock will return to its pre-report levels.

However, for those seeking a long-term, high-potential investment, the timing of your investment may not make a huge difference. The only takeaway from the stock's recent volatility is that it is inherently unpredictable–something investors should expect.

In conclusion, if you are comfortable taking on additional risk for a stock with potential for significant growth, consider investing in SoundHound AI.

James Brumley holds no investments in the stocks mentioned. The Motley Fool advises positions in Microsoft and Nvidia but has no current disclosures related to SoundHound AI.

investment, stocks, growth