McDonald’s Ditches AI Drive-Thru Voice Technology. What Could This Mean for SoundHound AI Stock?
McDonald's (NYSE: MCD) She recently announced that she would be stepping down Artificial Intelligence (AI)-Voice dialing technology supported by Universal business machines (NYSE: IBM). Instead, the fast food giant will look to replace the technology with an alternative solution by the end of the year.
Let's take a closer look at McDonald's decision and the impact it could have on it SoundHound AI (NASDAQ:SON)whose voice-activated AI technology has made a lot of progress in the restaurant industry recently.
A potential alternative to McDonald's
McDonald's decision to end its partnership with IBM for its automated order-taking technology after a two-year trial comes as a surprise, as the restaurant chain sold to IBM the technology that powers the solution in the fall of 2021. McDonald's originally purchased an AI-powered voice start-up dubbed Apprente in 2019 and combined it into a venture called McD Tech Labs, which it later sold to IBM. Since that deal, it has tested the technology and deployed it in more than 100 locations.
Voice ordering will be discontinued at all locations by July 26 of this year. When the technology was first rolled out, McDonald's said it was about 85% accurate and that it could take 80% of orders. However, with social media, some big technical mistakes have become widespread, such as adding ketchup and butter packets to ice cream and ordering water.
Mason Smoot, McDonald's chief restaurant officer, told franchisees that the company was happy with the trial but that there was “an opportunity to explore voice ordering solutions on a broader scale.”
SoundHound is a potential logical choice as an alternative to IBM, as the company has gained a lot of attention in the restaurant space with its AI-powered voice ordering technology and other industry-specific applications. These include its Smart Ordering platform, which takes orders and answers questions from incoming phone calls, as well as its Employee Assistance solution, which acts as a co-pilot via an employee's headset to help answer questions they may have, such as how to clean an ice cream machine.
SoundHound has deals with a number of large quick service restaurant (QSR) chains, including White Castle, Jersey Mike's, Five Guys, Noodles & CompanyAnd Chipotle Mexican Grillalong with top fintech companies for restaurants such as Toast, OluAnd Square. As such, it is certainly a strong contender to replace IBM as McDonald's new partner in AI-powered voice ordering technology.
However, SoundHound is not the only candidate. Wendy Uses alphabet Google Cloud to power its Fresh AI platform, which it is testing in some of its drives. Meanwhile, quick-service restaurants like Del Taco, which is owned by… Jack in the boxRally's, Checker's, and CKE have used solutions from companies like Presto Automation, Hi Auto tech, OpenCity, and Valyant AI.
In fact, Alphabet may be the favorite to win the deal, as McDonald's and Google Cloud entered into an agreement last December to apply generative AI solutions across its restaurants around the world. However, even with the Wendy's deal, voice AI is still not a core competency for Google, and if SoundHound had the better solution, it could still win the McDonald's deal.
Is it time to buy SoundHound stock?
Given McDonald's recent deal with Google Cloud, SoundHound likely won't be considered the company's favorite to win the deal, but if it does happen, it will help validate the company as a leader in voice AI, and the stock is sure to be in the news. The fact that McDonald's isn't rushing into a new deal right away and is looking to explore alternatives is good news, and SoundHound will likely get a chance to show off its technology to the fast food giant.
Trade more than 20 times forward Price to Sales (P/S) Multiple, SoundHound stock isn't cheap. However, the company has rapidly increased its revenues and built a large backlog. Meanwhile, a super-sized McDonald's catalyst could be on the way.
Opportunities like McDonald's and the successes it has in other industries and appliances outside of its core automotive and restaurant sectors could help the stock move from here. Although SoundHound has a lot of potential, it is still a speculative investment, given its value and the fact that it is still in the early stages of its growth phase. As such, any investments in growth technology stocks should be sized accordingly, given the risks.
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Susan Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeffrey Seller He has positions in the alphabet, blocks, and toast. The Motley Fool has positions in and recommends Alphabet, Block, Chipotle Mexican Grill, Olo, and Toast. The Motley Fool recommends International Business Machines. The Motley Fool has Disclosure policy.
McDonald's ditches AI technology while driving What could this mean for SoundHound AI stock? Originally published by The Motley Fool
