Shares of SoundHound AI (NASDAQ: SOUN) began Thursday’s buying and selling with a modest acquire and saved climbing practically all day lengthy. When the closing bell rang, the inventory had jumped 22.1% larger.
Meme inventory frenzy
The corporate had no information to report in the present day. It is earnings season, however SoundHound AI will publish its third-quarter outcomes subsequent Tuesday. The corporate did not file any paperwork with the Securities and Trade Fee (SEC) in the present day, nor did it ship out any press releases.
It was a usually robust market day for a number of causes, however SoundHound AI’s inventory should not outperform the remainder of the marketplace for that purpose.
However there are different forces at work. The supplier of synthetic intelligence (AI) instruments for audio interpretation and voice controls is performing like a meme stock in the present day.
The ticker was trending on the favored r/wallstreetbets stock-trading channel on Reddit (NYSE: RDDT) in the present day as a number of influencers steered heavy shopping for forward of the upcoming-earnings report. Many posts additionally highlighted SoundHound AI’s substantial short-sales curiosity at 24% of the overall share rely, setting it up for a sudden short-squeeze jump.
This can be a comparatively small inventory with a market cap of $2.5 billion in the present day and $2 billion at Wednesday’s market shut. A devoted group of social media customers have the ability to maneuver the value of shares with this profile — small, evenly traded, and with giant short-selling pursuits.
About 69 million SoundHound AI shares modified fingers in the present day, greater than triple the common trading volume during the last month.
SoundHound AI’s fundamentals are the true deal — however you should not purchase it in the present day
I like SoundHound AI for its long-term enterprise prospects, not for its potential to ship fast income with the assistance of social media campaigns.
After constructing an unparalleled audio-interpretation platform for many years, the corporate has entered a brand new period of big-time enterprise plans. The shopper checklist is lengthy and rising, with many main carmakers, eating places, and consumer-electronics giants. The backlog of unfilled orders and subscription-style contracts stood at $723 million within the latest-earnings report and can in all probability be considerably bigger in subsequent week’s report.
So yeah, I agree with the meme inventory crowd that SoundHound AI is a good investment, however I would not purchase it in the present day. These skyrocketing value spikes normally fade out in a matter of days, usually reversing into detrimental territory. And so they do completely nothing to assist the corporate run its enterprise or discover extra prospects.
In different phrases, I’d put SoundHound AI on the again burner whereas this on-line media frenzy lasts. The upcoming Q3 report could have my undivided consideration, and I am significantly focused on how the order backlog is rising. This isn’t the right time to buy SoundHound AI inventory.
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*Inventory Advisor returns as of November 4, 2024
Anders Bylund has positions in SoundHound AI. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
