Over the past couple of years, abnormally excessive inflation together with rising borrowing prices impressed some companies to focus extra on inside efforts and push off any concepts about acquisitions or particular initiatives.
However now that inflation is cooling and the Federal Reserve has begun to taper rates of interest, company stability sheets are strengthening.
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Furthermore, I believe it is solely a matter of time till the Federal Commerce Fee (FTC) chairwoman, Lina Khan, resigns earlier than President-elect Trump is sworn into workplace. Certainly one of my essential predictions for 2025 is that mergers and acquisitions will see a comeback amid an bettering macroeconomic image and the excessive probability that management on the FTC modifications underneath the incoming administration.
One firm that I see as a gorgeous acquisition candidate is SoundHound AI(NASDAQ: SOUN), which focuses on voice-recognition assistants powered by synthetic intelligence (AI). Beneath, I’ll element why speech recognition is a crucial element of the AI ecosystem, and discover why SoundHound AI appears to be like like a logical acquisition prospect.
Voice-enabled AI makes use of pure language processing (NLP) and machine studying to coach units to grasp and course of phrases and phrases. Widespread purposes of this know-how embody Web of Issues (IoT) home equipment resembling sensible thermostats or assistants like Amazon‘s Alexa.
The AI embedded in these instruments can assist you set reminders, receive common data by asking a query, and even change the temperature all through your own home — all by leveraging your voice and eradicating any handbook or bodily steps in between.
Based on Statista, the worldwide complete addressable market (TAM) for speech recognition is estimated to succeed in $15.9 billion by 2030 — barely greater than double what it’s price in the present day.
Whereas there may be clear demand for AI-powered speech recognition, which companies are literally investing on this know-how? The reply could shock you.
Picture supply: Getty Photographs.
Along with Amazon, the businesses listed beneath have invested considerably into AI voice assistants over the past a number of years:
Alphabet: Much like Amazon, it additionally has a line of smart-home merchandise. The corporate’s Google Dwelling units are primarily a direct competitor to Amazon’s Alexa, whereas the corporate’s smart-home merchandise — together with audio system, thermostats, doorbells and locks, and far more — are bought underneath its Nest model.
Microsoft: A few years in the past, the corporate acquired a developer of AI voice recognition known as Nuance for almost $20 billion. Nuance gained traction in just a few essential finish markets, however primarily centered on healthcare. For Microsoft, the deal represented a possibility to leverage a brand new sort of know-how whereas additionally permitting the corporate to cross-sell its numerous companies — explicit its Azure cloud computing infrastructure — to main organizations already working with Nuance. Its accomplice OpenAI has additionally been experimenting with voice-powered AI instruments. Though it is nonetheless early days, Microsoft seems to be effectively positioned within the speech recognition phase of the AI panorama.
Apple: The corporate’s main foray into speech recognition is thru its AI assistant, Siri. It is built-in all through Apple’s {hardware} merchandise and may perceive customers’ voices to reply questions and carry out fundamental duties resembling scheduling. A number of years in the past, Apple additionally acquired Shazam, an app that may course of musical lyrics and generate data together with the artist, album, and music identify.
Nvidia: The corporate is probably essentially the most peripheral participant amongst large tech with regards to voice recognition software program. Based on its 13F filings, Nvidia owns a small fairness stake in SoundHound AI by way of an funding it made within the firm when it was nonetheless non-public.
I see just a few causes SoundHound is a gorgeous acquisition candidate. First, the marketplace for AI speech recognition is predicted to develop significantly over the following a number of years. Moreover, most of the world’s most influential companies have already invested considerably into this sort of know-how.
To me, SoundHound AI represents one other sew within the broader AI voice cloth — and one which comes with some distinctive options.
It primarily focuses on business-to-business (B2B) finish markets resembling eating places, hospitality, and automaking. Nevertheless, the corporate additionally developed an app that competes with Shazam, and so it additionally has merchandise that sort out a extra business-to-consumer (B2C) alternative as effectively.
SOUN income (quarterly) information by YCharts.
I discover the traits detailed above fairly fascinating. SoundHound AI is witnessing spectacular demand, however the firm is but to succeed in the size wanted to develop profitably. Contemplating that large tech is already investing closely in voice-powered AI, I believe it is protected to say that SoundHound AI goes to have hassle competing with these companies given its restricted monetary horsepower.
The one disadvantage with SoundHound AI is valuation. At a price-to-sales a number of (P/S) of 46, the inventory is much from a discount. However with that mentioned, the corporate’s market cap is roughly $5 billion. For most sensible acquirers, such a price ticket is not an issue.
These elements have me pondering it will be higher off functioning inside a bigger group with a extra strong stability sheet. In different phrases, getting access to the sources of bigger companies might doubtlessly velocity up SoundHound AI’s progress significantly.
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*Inventory Advisor returns as of December 2, 2024
John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Suzanne Frey, an government at Alphabet, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Idiot has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
Prediction: This Synthetic Intelligence (AI) Firm Will Be Acquired in 2025 was initially revealed by The Motley Idiot
