Could SoundHound AI Stock Become the Next Arm Holdings?
SoundHound AI (NASDAQ: SOUN) garnered a lot of attention after it was revealed that it was one of four stocks, along with Arm Holdings (NASDAQ: ARM), that Nvidia (NASDAQ: NVDA) invested in late last year. Nvidia took some of its ample cash and invested in companies it thought could greatly benefit from the upcoming artificial intelligence (AI) revolution.
Now there is a huge difference in size between SoundHound, which has a market cap of just over $1 billion, and Arm, which has a market cap of nearly $100 billion. Despite being just about one-hundredth of the size of Arm, SoundHound does share some intriguing similarities with the company.
One trait that helped lift Arm to where the company is today is its business model, which generates a lot of recurring revenue over long periods of time. The company licenses its technology to other companies getting upfront payments, but then collects royalties thereafter on every chip a customer ships based on its architecture. The model has proven to be so enduring that nearly half of Arm's royalty revenue comes from products that were introduced in 2012 or before.
Source Fool.com
