Is SoundHound AI (NASDAQ: SOUN) A Name To Follow Through Earnings?

The artificial intelligence (AI) industry has faced a lot of attention over the last year to 18 months. Such a rapid ascent is bound to bring some pullbacks. As some stocks' recent performance has declined, many have questioned the sector's long term potential but is it too soon? Market conditions and risk appetite are big factors in growth sectors, and nothing describes AI stocks better than that in recent times.

Nevertheless, industry leaders in AI continue to demonstrate resilience and are positioning themselves as worthwhile shortlist names for the future.

Companies like Palantir Technologies (NYSE: PLTR), Snowflake (NYSE: SNOW), and SoundHound (NASDAQ: SOUN) serve as examples outside of the usual big names, with all three scheduled to report earnings in May. There will be plenty of clues about market direction before then but for now, with all three in the green through today so far, let's take a look at these names.

Snowflake is a strong contender in the AI space, boasting over 9,400 customers as of the end of its fiscal 2024 year. Particularly significant is the 22% growth in its customer cohort spending over $1 million annually, emphasising Snowflake's growing appeal among large-scale enterprises. Moreover, the company's fiscal 2024 saw a revenue jump by 36%, coupled with an impressive $810 million in adjusted free cash flow, illustrating the financial efficacy of its cloud-based data platform.

Palantir Technologies‘ is known for its sophisticated AI platforms, and is solidifying its position within the defense and intelligence sectors. Palantir's growing traction is underscored by recent government contracts, including a $9.8 million contract awarded by the US Defense Information Systems Agency, and a substantial $178 million contract from the Army. These agreements not only validate Palantir's technology but also its strategic importance to national security and defense apparatus.

The company's growth story is not simply confined to government contracts, as Palantir also reported a notable 55% year-over-year increase in U.S. commercial customers during the fourth quarter. In a further show of confidence, Palantir announced a partnership with tech giant Oracle (NYSE: ORCL) to distribute its AI technology, suggesting a robust demand spanning various industry sectors, from energy to healthcare.

Turning to audio and SoundHound AI is a growing presence. With Nvidia investment in the company, the attention is only increasing. The broader adoption of AI technology across various industries, including voice support in vehicles helps bring additional revenue in to the company's coffers. With SoundHound voice assistant launched by Stellantis in Japan, this is a good signal, this the firm remains the smallest of the three names here. You can see from the table below the market cap is significantly lower, and during times of heightened volatility, it is these names that can swing the wildest.

Analyst expectations reflect the same, with the largest average price target upside for NASDAQ: SOUN of the three. Shareholders would see almost a doubling from the current value up to the consensus mark, but there will need to be further momentum in order to push valuations up towards those levels. Some rather negative commentary has also hit the firm, with one analyst at Capybara even going so far as to say they valued SOUN at “$1 pre share or less”.

One should not get carried with analyst targets to the upside, or the down, as the tendency for enthusiasts to look for echo chamber forecasts has the potential to get out of hand. A good range of targets, data, and technicals, gives a better foundation than one point alone.

In a market that still has clouds of skepticism, markets will want to see more profitability in times to come, with risk demanding a premium. While market volatility and uncertainty may challenge investor sentiment in the short term, companies will need robust financials to help through that next leg.

Whilst AI focused tech names may not be the right call for those who are risk averse, it may be worth building out your list of names to follow for when markets become a little more risk on.