We recently published a list of 10 Best Mid Cap AI Stocks to Buy Now. In this article, we are going to take a look at where SoundHound AI, Inc. (NASDAQ:SOUN) stands against other best mid cap AI stocks to buy now.
In 2025, the technology companies continue to focus on developing AI platforms that meet their enterprise customers’ needs for optimized performance, profitability and security, says Morgan Stanley. In doing so, they have been partnering throughout the AI ecosystem of chips companies, hyperscalers, large language models, and data and software companies while grappling with the US trade policy unknowns and resource constraints. The firm believes that the top trends in new AI frontiers and the emphasis on enterprises consist of AI reasoning, cloud migrations, custom silicon, systems to measure AI efficacy, and developing an agentic AI future.
Key Themes Likely to Shape the Industry
Morgan Stanley, while quoting executives from companies designing and making chips, stated that AI reasoning happens to be one of the biggest drivers of higher compute demand, and thus, semiconductors. Notably, AI reasoning goes over and above the basic understanding and into advanced learning and decision-making, which needs additional compute for pre-training, post-training, and inference. As per Marco Lagos Morales (Head of U.S. Semiconductor Investment Banking at Morgan Stanley), for chip companies, customer demand remains in the breadth of AI workloads for programmable infrastructure.
The next theme revolves around LLMs seeing potential in AI reasoning for enterprises. Morgan Stanley highlighted that companies that have developed the world’s biggest LLMs focus on using the most effective chips and building the best software to provide AI services that become critical for companies and consumers. As per LLM executives, while the early use cases for LLMs revolved around content generation, summarization, and classification, the biggest untapped potential is in AI reasoning for the enterprise data.
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Software Companies Focusing on Agentic AI, Says Morgan Stanley
The software executives mentioned regarding their current use of AI for the purposes of productivity gains in marketing and engineering and their longer-term prospects in a bid to gain market share in an agentic computing future. Morgan Stanley further highlighted that such companies continue to aim to create large systems deploying AI agents to make decisions, take autonomous actions, and adapt to dynamic environments for real-world applications throughout various industries. According to Brittany Skoda, Global Head of Software Banking, software companies continue to compete to create larger operating systems that harness machine learning, natural language processing, LLMs, GenAI, and decision-making algorithms to move towards an agentic future.
Our Methodology
To list the 10 Best Mid Cap AI Stocks to Buy Now, we used a screener and sifted through several media reports to shortlist the mid-cap companies catering to the AI industry. Next, we selected the stocks that are the most popular among hedge funds. We have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A software engineer focused on a computer screen, writing code to create a conversational assistant.
SoundHound AI, Inc. (NASDAQ:SOUN)
Market Cap as of March 27: $3.6 billion
Number of Hedge Fund Holders: 21
SoundHound AI, Inc. (NASDAQ:SOUN) is engaged in developing independent voice artificial intelligence (AI) solutions that enable businesses throughout automotive, TV, and IoT, and to customer service industries to deliver high-quality conversational experiences to their customers. DA Davidson upped the price objective on the company’s stock to $13.00 from the prior target of $9.50 while maintaining a “Buy” rating. The higher demand for SoundHound AI, Inc. (NASDAQ:SOUN)’s solutions stems from its expansion into several industries, such as financials, healthcare, and energy.
The acquisition of Amelia was a strategic move for the company, significantly enhancing the total addressable market (TAM) and contributing to the diversification of its business. The expansion into new sectors remains a critical factor behind the increased target price. Furthermore, the analyst’s optimistic outlook stems from SoundHound AI, Inc. (NASDAQ:SOUN)’s capability to maintain a healthy growth trajectory. Notably, the company’s continued focus on innovation and market penetration seems to be bearing fruit.
The business combination because of the Amelia acquisition places SoundHound AI, Inc. (NASDAQ:SOUN) as the foremost provider of voice and conversational generative AI, with reach throughout multiple industries – such as retail, financial services, healthcare, automotive, smart devices, restaurants, and more. SoundHound AI, Inc. (NASDAQ:SOUN) can benefit as enterprise spending on generative AI is expected to gather more momentum.
Overall, SOUN ranks 10th on our list of best mid cap AI stocks to buy now. While we acknowledge the potential of SOUN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than SOUN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.