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Why AI Stock SoundHound AI Was Skyrocketing Today

Source The Motley Fool

Next-generation audio technology company SoundHound AI (NASDAQ: SOUN) was sweet music to investor ears on Tuesday. Thanks largely to news of a deal with a prominent Asian company, investors were enthusiastic about its future, and were bidding its share price up by nearly 9% in late-session trading.

That was more than good enough to eclipse the benchmark S&P 500 index, which was posting a 2.4% gain at that point in time.

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In-car AI

SoundHound AI -- a developer of voice and general audio artificial intelligence (AI) solutions, as its name implies -- announced it has struck a deal with a division of China-based tech conglomerate Tencent.

Under the terms of the arrangement, SoundHound AI will provide its AI voice technology for in-car driving assistance systems to Tencent Intelligent Mobility. The latter is a Tencent business that concentrates on such solutions.

In the company's words, this work will see it "deliver dynamic, localized user experiences to automotive players across geographies that are looking to provide end users with seamless handsfree access to a range of in-vehicle applications."

SoundHound AI claims that its AI software allows users to ask detailed questions, and quickly receive accurate and useful replies. This can be particularly useful to drivers seeking help with numerous aspects of navigation and other in-car services.

Show me the money

What was missing in SoundHound AI's press release touting the deal was any detail about its financial arrangements. Without some idea of how much the AI company stands to earn from the project it's impossible to gauge the potential effect on its fundamentals.

That being said, a tie-up with a powerful tech company will certainly be a boon for its business, not least from the prominence it will bring if the arrangement is successful. Investors were right to be bullish on SoundHound AI after it divulged the happy news.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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