Many investors looking to substantially build their financial assets ahead of retirement have found growth stocks to be a highly effective means. However, the recent downturn in the market serves as a reminder that even the most promising of corporations can experience a decline in their share prices in any given period. Investors should bear in mind that the ups and downs of a company’s stock value do not ultimately reflect the company’s long-term worth, as there are numerous short-term variables that can influence stock prices. Traders, who generally operate on a more immediate time frame than retirement savers, heavily influence the constant fluctuations in the market.
A clear example of this can be seen with SoundHound AI (SOUN 23.72%) and The Trade Desk (TTD 10.49%), two growth stocks that faced significant losses this year. Despite this, both corporations have recently revealed impressive first-quarter fiscal results which could suggest a potential for rebound.
SoundHound AI has demonstrated notable potential for growth in recent years, standing out for its provision of AI-driven conversational voice technology to numerous leading brands in the restaurant and automobile sectors. The firm’s stocks soared last year, reaching over $20; however, they have since fallen by 61% from those high. Nevertheless, after SoundHound AI recently reported another quarter of strong growth, one is left to wonder if the company might be gearing up for another surge.
An impressive 151% year-over-year growth was reported for the first quarter, significantly driven by the acquisition of Amelia last year. The integration of Amelia will allow SoundHound AI to adapt their technology to new markets, such as healthcare and financial services. During the last quarter, SoundHound AI launched Amelia 7.0, crafted to enable customers to execute tasks automatically using voice-operated AI agents without needing further directions.
The company has been focusing heavily on voice technology for two decades, accumulating data from millions of dialogues across a multitude of languages. This considerable cache of information has significantly improved its voice AI technology, potentially positioning SoundHound AI ahead of its competitors. A clear sign of success lies in the company’s collaboration with Nvidia, a leading AI chip supplier, which has certified the capabilities of its voice AI technology.
SoundHound AI’s voice AI technology is integrated with Nvidia’s AI Enterprise platform, enabling faster processing times and more reactive voice AI. The company continues to make significant strides in expanding its customer base, and notably, no single client contributes more than 10% to its total revenue, effectively eliminating any risk related to customer concentration.
However, improvement in profitability is an area that SoundHound AI needs to focus on, as it reported an adjusted net loss of $22 million against its $29 million in revenue in the first quarter. Moreover, the company’s stock is currently trading at an expensive 38 times trailing sales.
Despite these factors, the company’s continued growth, strategic acquisitions, and partnership with Nvidia make it a growth stock worth evaluating for mid-cap investors. Investors on the lookout for a rapidly expanding business with significant potential in the AI sector could find SoundHound AI to be an appealing proposition. If it successfully narrows its losses while maintaining high revenue growth, it is possible that the company could prove to be a long-term asset.
The Trade Desk, a leading digital advertisement buying platform, represents another company worth considering. Amid a year saturated with economic uncertainties, marketers are hunting for ways to maximize the return on their advertising expenditure, and many are turning to The Trade Desk. Despite a rare revenue shortfall in the fourth quarter causing its stock value to halve earlier this year, The Trade Desk has rebounded with a robust growth quarter to kick off 2025.
Revenue reported a 25% growth over the same quarter from the previous year, indicating a promising return. The profits of the company also witnessed a remarkable rise with earnings per share soaring 67% year over year.
Having consistently delivered high growth for many years, namely an average annual revenue growth of 49% over the past decade, The Trade Desk still only accounts for a minimal 1% of total advertising expenditure. The company’s Kokai platform, which utilizes AI to evaluate millions of ad impressions in real-time, thereby enhancing the effectiveness and return on ad investment, is being relied upon by investors to sustain this growth.
Management expects that by year’s end, all clients will have transitioned to using the Kokai platform. Furthermore, the continuous shift of user time spent on platforms not under the control of major tech giants such as Google could potentially benefit The Trade Desk in the long term.
With only half of advertising expenditure currently dedicated to the open internet, despite more than half of Americans spending their time there, a significant opportunity appears to be on the horizon for The Trade Desk. Projections show the company’s earnings growing at an annual rate of 31% in the upcoming years.
However, this investment isn’t without its costs, as the company’s stock trades at around 41 times its estimated earnings this year. Therefore, investors interested in the unique opportunities The Trade Desk might present should seize the opportunity provided by the recent decline in stock value.
Despite such a price, the unique opportunities of The Trade Desk might still represent a fair valuation given the high-quality growth expectations. Both SoundHound AI and The Trade Desk, having weathered recent setbacks in their stock values, illustrate that certain conditions beyond a company’s control can influence stock prices in the short-term, a vital lesson for those investing for retirement.