Investors have been piling into Nvidia shares over the past year, considering the chip giant the best AI play around. While that may be true, there are obviously other good AI opportunities out there. And who has decided to point that out to investors? Well, Nvidia has.
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Case in point: SoundHound AI (NASDAQ:SOUN). The voice recognition specialist saw its stock surge by 67% in a single session last week, fueled by news of Nvidia’s investment. According to a recent 13-F filing, Nvidia held about 1.7 million shares of Soundhound, valued at around $3.7 million as of the end of 2023.
So, not huge money but an endorsement from the AI king obviously got investors excited and that is a good thing, says H.C. Wainwright analyst Scott Buck.
“While a relatively minor investment, given roughly 246.9M SOUN shares outstanding, we believe the investment validates much of the work accomplished by SoundHound to-date and provides added credibility to the company’s growth strategy by a leader in the AI space,” the analyst opined. “As seen in Thursday trading, we expect NVIDIA’s involvement in SOUN shares to drive new investor interest in the company and potentially re-rate valuation levels.”
The company is due to report Q4 earnings on February 29, and that could offer another catalyst. Additional proof that the company is progressing towards reaching breakeven levels, along with an update on the recently finalized acquisition of SYNQ3 Restaurant Solutions, and the potential of a revenue guide for 2024, could further boost investor confidence and support the recent gains.
Considering the “meaningful growth opportunity” and anticipating an improving margin profile over time, Buck thinks that even after the big gains, the shares’ valuation “remains attractive.”
“We recommend investors accumulate a position in SOUN shares ahead of more positive operating results and favorable news flow driven by secular growth within the AI sector,” the analyst further said.
All in all, Buck maintained a Buy rating on the shares, backed by a $5 price target, implying the shares will post further growth of 25% in the year ahead. (To watch Buck’s track record, click here)
Only 2 other analysts have recently chimed in with SOUN reviews, but like Buck, they are also positive, making the consensus view here a Strong Buy. Going by the $4.67 average price target, a year from now, the shares will be changing hands for a 17% premium. (See SoundHound stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
