McDonald’s has introduced AI drive-through voice technology. What does this mean for SoundHound AI stock?

McDonald’s (NYSE: MCD) It recently announced that it would discontinue artificial intelligence (AI)-based voice ordering technology. international business machine (NYSE: IBM). Instead, the fast food giant will look to replace the technology with alternative solutions by the end of the year.

Let’s take a closer look at McDonald’s decision and what impact it could have. SoundHound AI (Soun -4.66%)His voice-based AI technology has been making a lot of inroads in the restaurant space lately.

Potential replacement for McDonald’s

McDonald’s decision to end its partnership with IBM on automated order-taking technology after two years of testing comes as a surprise. That’s because the restaurant chain sold the technology powering its solution to IBM in the fall of 2021. McDonald’s originally purchased AI Voice Startup. -up called Apprente in 2019 and integrated it into a venture called McD Tech Labs, which it later sold to IBM. Since that deal, we’ve been testing the technology and deployed it in more than 100 locations.

Voice ordering technology will be blocked in all regions by July 26th of this year. When the technology was first launched, McDonald’s said it was about 85% accurate and could account for 80% of orders. But some of tech’s bigger blunders have gone viral via social media, including adding ketchup packets and butter to sundae and water orders.

Mason Smoot, McDonald’s chief restaurant officer, told franchisees the company was pleased with the trial but had “opportunity to explore voice ordering solutions more broadly.”

Image source: Getty Images.

SoundHound is a potential logical choice to replace IBM, as it has gained a lot of traction in the restaurant space with its AI-powered drive-thru voice ordering technology and other industry-specific applications. These include a smart ordering platform that takes orders and answers questions in inbound phone calls, and an Employee Assist solution that acts as a co-pilot on employees’ headsets, helping them answer questions like how to clean ice. Cream machine.

SoundHound operates in White Castle, Jersey Mike’s, Five Guys, Noodle & Companyand Chipotle Mexican GrillWith top restaurant fintech companies such as: toast, Olloand square. Therefore, it is clearly a viable competitor to replace IBM as McDonald’s new voice AI-based ordering technology partner.

But SoundHound isn’t the only candidate. Wendy’s in use alphabet Google Cloud supports the Fresh AI platform, which is being tested in select drive-thrus. Meanwhile, QSRs like Del Taco jack in the boxRally’s, Checker’s and CKE have used solutions from companies such as Presto Automation, Hi Auto tech, OpenCity and Valyant AI.

In fact, Alphabet could be the favorite in this deal, as McDonald’s and Google Cloud agreed last December to roll out generative AI solutions to restaurants around the world. But despite the Wendy’s deal, voice AI still isn’t Google’s core competency, and if SoundHound has a better solution, it could still land a McDonald’s deal.

Is it time to buy SoundHound stock?

Considering McDonald’s and Google Cloud’s recent deal, SoundHound wouldn’t be considered the most likely to get a deal done. But if it does, it will help establish that the company is a leader in the voice AI space, and the stock will definitely be in the news. . The fact that McDonald’s is exploring alternatives rather than immediately entering into a new deal is good news, and will give SoundHound a chance to showcase its technology to the fast food giant.

Soundhound’s stock price, trading at a forward price of more than 20 times its sales (P/S) multiple, is not cheap. However, the company is growing its sales rapidly and has accumulated a large backlog of business. Meanwhile, McDonald’s mega-catalyst may soon become a reality.

SOUN PS Ratio(Forward) data from YCharts

Opportunities like McDonald’s and its forays into other industries and devices outside of its core automotive and restaurant sectors could help the stock move from here. SoundHound has a lot of potential, but considering its valuation and the fact that it is still early in its growth phase, it remains a speculative investment. Therefore, investments in these growth technology stocks should take the risks into account and size them accordingly.