Well That Escalated Quickly: NVIDIA + SoundHound AI 👀

Why shares of SoundHound AI are up >60% Today

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🏆It’s hard to “forget” NVIDIA now…

Well, that escalated quickly.

It’s not every day that a stock you write about soars nearly 70% in a single session — let alone less than 24 hours later while referencing another company directly responsible for the pop.

Yet here we are, with SoundHound AI (NASDAQ: SOUN) having rallied 66.7% today on the news that none other than GPU and AI titan NVIDIA (NASDAQ: NVDA) has taken a stake in the voice-centric AI platform provider.

In case you missed it, yesterday we offered the tongue-in-cheek suggestion that investors “forget” NVIDIA and focus on three small-cap AI stocks instead. One of those small-caps happened happened to be SoundHound AI, which I argued was an “attractive investment for those betting on the proliferation of voice enabled technologies across various sectors.”

The news came in NVIDIA’s inaugural 13F SEC filing — a quarterly form publicly traded companies in the U.S. are required to complete if the collective value of their U.S. equity holdings exceeds $100 million.

SoundHound was one of five stocks present in the filing, with NVIDIA disclosing a relatively modest 1.73-million share stake worth about $3.7 million at the end of 2023 ($6.5 million as of this writing after today’s pop).

NVIDIA also disclosed a $147 million, 1.96-million share stake in ARM Holdings (NASDAQ: ARM) — the semiconductor giant it tried to acquire for $40 billion back in 2020 before regulators scuttled the deal. And we know a thing or two already here at BLI about regulators scuttling deals, don’t we? 🙄

And no, I don’t have a crystal ball. And I certainly can’t take credit for SoundHound AI’s rally today. But it’s amusing regardless — especially as someone who personally bought shares of NVIDIA back in 2010 and rode it to 100-bagger status last year.

🗞 THE BOTTOM LINE

  • However small, this vote of confidence from NVIDIA understandably sent SoundHound AI skyward. With SoundHound shares still well below their post-SPAC merger highs from 2022, it’ll likely spur musings over its status as a potential M&A candidate as AI leaders seek to capitalize on industry consolidation.

    I’d advocate some caution if you’re thinking about opening or adding to a position in SoundHound AI now. It might well pull back in the near term after this furious rally. But I’m still excited for SoundHound’s prospects as it pertains to its ability to deliver outsized gains for investors over the long term, and still plan to recap its quarterly results here at Bottom Line Investing after they hit the wires early next month.

📝 BLI Premium Portfolio Update: +15%

  • The BLI Premium Portfolio is now up 15% since its launch last month. To be clear, that’s an unusual gain over such a short period, driven in part by a few well-placed starting positions ahead of quarterly earnings season. But I’ll happily take the early lead as I continue to build out the portfolio with long-term gains in mind.

    BLI Premium Portfolio Returns as of Feb. 15, 2024


    If you’re not already a BLI Premium Member: 1.) Why not!? And 2.) You can gain access to the BLI Portfolio by upgrading your subscription here. My early subscriber rate of $100/year is still up for grabs.

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