The term "Magnificent Seven" was coined by CNBC's Jim Cramer to represent a select group of leading technology giants. This collection includes:
- Nvidia
- Microsoft
- Apple
- Alphabet
- Amazon
- Meta Platforms
- Tesla
Investing in these companies over the last five years would have resulted in substantial gains. The key question now is whether they can maintain this momentum in the future.
Although the ongoing expansion of artificial intelligence (AI) infrastructure still offers significant opportunities, I believe investors should also look at other promising stocks beyond the Magnificent Seven.
One such company that has caught the attention of many investors is SoundHound AI ( SOUN -1.38%). While SoundHound AI is much smaller than the aforementioned tech giants, its size allows for rapid growth if demand for its solutions rises. With AI adoption accelerating across sectors, SoundHound AI stands out as an interesting investment, and it may even surpass the Magnificent Seven's performance over the next five years.
Image credit: Getty Images.
SoundHound AI's technology is gaining traction
As its name suggests, SoundHound AI specializes in integrating AI with audio, offering advanced audio recognition and AI-generated voices that closely mimic real human speech, rather than sounding robotic.
This idea isn't entirely new—Apple's Siri and Amazon's Alexa have existed for years. However, those assistants often struggle with accuracy and can misinterpret user requests. In contrast, SoundHound AI's solutions tend to be more reliable and, in some cases, even outperform humans.
There is a vast market for AI-driven interactions in areas like drive-thrus, banking, and healthcare billing, where AI can replace traditional human-to-human exchanges. SoundHound AI's offerings have already been widely implemented in these sectors, fueling impressive growth for the company.
SoundHound AI is delivering remarkable growth
During the second quarter, SoundHound AI's revenue soared 217% year over year, reaching $42.7 million—a new high for the company. The quarter also brought notable developments, such as securing seven of the world's top 10 financial institutions as clients and renewing or expanding contracts with four of them.
SoundHound AI's stock is gaining significant momentum, and the company's leadership is optimistic about its future. CFO Nitesh Sharan has projected that organic growth of at least 50% is expected for the foreseeable future. This is encouraging for investors, especially since SoundHound AI has made several acquisitions to expand its offerings. Achieving 50% or higher growth from existing business lines is a noteworthy accomplishment.
Among the Magnificent Seven, only Nvidia comes close to matching this level of sustained growth, and even its pace has started to slow in recent quarters.
Given this, I believe SoundHound AI is well-positioned to outperform this elite group over the long haul. However, one issue to consider is the company's valuation.
With a price-to-sales ratio exceeding 50, SoundHound AI's shares are far from inexpensive.
SOUN PS Ratio data provided by YCharts
This suggests that the current stock price may already reflect a year or two of anticipated growth. Still, if SoundHound AI can deliver on its 50% organic growth target over the next five years, today's valuation could prove to be a bargain.
SoundHound AI has significant upside potential if its technology continues to gain widespread adoption. However, there is no certainty it will dominate the market, as larger tech companies could introduce competing products that disrupt its progress. As long as investors are aware of these risks and size their positions accordingly, SoundHound AI remains an attractive investment opportunity.
Only time will reveal whether SoundHound AI can outperform the Magnificent Seven, but I believe it has an excellent shot at doing so.
