SoundHound AI trades at 21 times sales but has a billion-dollar contract backlog and expects break-even EBITDA in 2025.
Investing $100 per month at an annual return of 15% would turn $12,000 into $27,675 by 2036.
The real magic isn't stock picking; it's consistent investing over long time horizons.
SoundHound AI (NASDAQ: SOUN) voice controls are finding users in drive-through windows, phone menu systems, and in-car infotainment systems. A billion-dollar backlog of long-term contracts has started to generate revenues, management expects break-even EBITDA profits in 2025, and the total addressable market for voice-driven human-to-computer communication is enormous.
Starting from a $3.13 billion market cap and a share price of $7.46, it seems reasonable to expect roughly 15% of compound annual growth rates (CAGR) for the next decade. That's just ahead of the S&P 500 (SNPINDEX: ^GSPC) index's 13.8% CAGR over the last 10 years, and I'm talking about an artificial intelligence (AI) stock in the early innings of a promising growth story.
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But let's say SoundHound AI doesn't rise above that 15% average return rate in the next decade. There will be ups and downs along the way, of course, but averages are averages. And over that period, you're investing $100 per month in this stock, rain or shine.
That's $1,200 per year for a total investment of $12,000 over 10 years. But the stock should rise over time. With a 15% average annual boost, SoundHound AI should be worth approximately $12.7 billion in 2036 (assuming the share count holds firm). That's a 305% price gain, also known as quadrupling. And the money you invest in the early days earns compound returns later on. It's like earning interest on top of interest.
Those compound returns add up over time. By 2036, my 15% CAGR target will result in a total value of $27,675.
That's $12,000 of your invested cash plus $15,675 in investment returns. You'd double your money in the summer of 2034, and the percentage gains should only grow from there.
A high-octane growth stock like SoundHound AI can build serious wealth over the years. You can say the same about steady investments over time, even if you're settling for annual returns in the ballpark of the broader stock market.
The $100 feels invisible every month. The $707,181 in 2056 won't.
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Anders Bylund has positions in SoundHound AI. The Motley Fool has positions in and recommends SoundHound AI. The Motley Fool has a disclosure policy.