In a surprising decision, McDonald’s has announced the discontinuation of its AI-powered voice ordering technology, developed in collaboration with international Business Machines (NYSE: IBM). The fast-food chain is now exploring alternative solutions to replace this technology by the end of the year, raising questions about its potential impact on SoundHound AI (SOUN -1.06%), a company that has been making significant strides in voice-powered AI technology in the restaurant industry.
The decision to terminate its partnership with IBM for automated order-taking technology comes as a surprise, given that McDonald’s had previously acquired an AI voice start-up called Apprente, integrating it into a venture called McD Tech Labs, which was later sold to IBM. After a successful two-year trial period, with the technology deployed at over 100 locations, McDonald’s has decided to discontinue the voice-ordering technology at all its locations by July 26th. Despite initial success, with an 85% accuracy rate and the ability to process 80% of orders, the technology faced some larger scale challenges that gained traction on social media.
McDonald’s chief restaurant officer, Mason Smoot, expressed satisfaction with the trial but sees “an opportunity to explore voice ordering solutions more broadly.” As McDonald’s seeks a replacement for IBM, SoundHound emerges as a potential choice due to its traction in the restaurant industry with its AI-powered drive-thru voice ordering technology and other industry-specific applications such as Smart Ordering and Employee Assist. However, SoundHound is not the only contender, as companies like Wendy’s, Alphabet’s Google Cloud, and various quick-service restaurant chains have also been pursuing voice AI technologies.
Alphabet’s Google Cloud could potentially be the frontrunner, as they previously entered an agreement with McDonald’s in December to apply generative AI solutions across its restaurants worldwide. This competition places SoundHound in a challenging position, but if they emerge as McDonald’s new voice AI-powered ordering technology partner, it could significantly validate the company’s position as a leader in the voice AI space.
The potential partnership with McDonald’s could have a substantial impact on SoundHound’s stock, potentially leading to a surge in its value. Despite trading at a high price-to-sales multiple, the company has been experiencing rapid revenue growth and has built a large backlog of business. This opportunity with McDonald’s could further propel the stock’s movement and validate its potential in other industries and devices. However, it’s essential to note that SoundHound remains a speculative investment given its valuation and growth phase. As a result, investors should approach any investment in this growth tech stock with caution, considering the associated risks.