Why SoundHound AI Stock Jumped by 18.7% This Week

Shares of conversational artificial intelligence (AI) company SoundHound AI (NASDAQ: SOUN) had jumped by 18.7% this week as of early Friday, according to data from S&P Global Market Intelligence, as investors reacted to two pieces of news.

The first was SoundHound's announcement that it's partnering with Rekor Systems to bring a voice command and data-sharing system to emergency vehicles. The second came from President Trump, who revoked an executive order signed by former President Biden that had required companies developing artificial intelligence systems to conduct safety tests of their AIs and share the results with the U.S. government.

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SoundHound AI's platform expanding to emergency vehicles

The new partnership with Rekor will put SoundHound's conversational AI first into police vehicles, and then eventually into fire trucks and ambulances as well. The company said in a press release that officers will use SoundHound's voice commands to manage their vehicle's automatic license plate recognition (ALPR) system, two-way radios, PA systems, and other controls.

SoundHound is already a leader in voice-activated vehicle controls, providing conversational AI features for Honda, Stellantis, Hyundai, and other automakers. In 2023, 90% of the company's revenue came from its automotive customers, though the company has significantly diversified its revenue streams since then across the restaurant, financial services, healthcare, and insurance industries.

The new Rekor partnership shows that even as SoundHound expands into new markets, it remains a leading player in in-vehicle voice technology.

Investors see a bigger shift toward AI

In addition to the Rekor announcement, SoundHound investors were also excited to see Trump rolling back some requirements on artificial intelligence companies this week.

One of the key elements of Biden's 2023 executive order on AI required that tech companies building powerful AI models conduct safety tests and share some details about their inner workings with the U.S. government before those models were made available to the public. Those companies no longer need to follow that process.

It's important to clarify that Biden's executive order probably didn't affect SoundHound's ability to run its business. Instead, the current administration is showing an openness to AI advancements with less regulation, which boosted SoundHound's stock.

SoundHound has become a top AI stock recently, as its share price soared by 777% over the past 12 months. While the company is clearly a leader in conversational AI, its recent gains have given the stock a price-to-sales ratio of 74, which is a hefty premium.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.