In a surprising move, McDonald's (NYSE: MCD) has announced its decision to part ways with the AI-voice ordering system provided by IBM, opting to find an alternative solution by the end of the year. This development has led to speculation about the potential impact on SoundHound AI (SOUN -0.78%) stock, which could be in the running to replace the displaced technology.

McDonald's decision to end its partnership with IBM for automated order-taking technology comes after a two-year trial period. The fast-food giant had originally sold the technology to IBM in 2021, making the decision unexpected. The AI voice start-up, Apprente, was purchased by McDonald's in 2019 and integrated into McD Tech Labs, which was later sold to IBM. The technology was subsequently tested at over 100 McDonald's locations, but it will be shut off at all outlets by July 26, 2024.

While McDonald's did not explicitly name SoundHound as a potential replacement for the AI-voice ordering system, it is a strong contender. SoundHound has made significant progress in the restaurant space with its AI-powered drive-thru voice ordering technology and other industry-specific applications. The company's Smart Ordering platform handles orders and customer queries received via inbound phone calls, while its Employee Assist solution acts as a helpful resource for employees, providing answers to their questions, such as maintenance instructions for the ice cream machine.

SoundHound has already secured partnerships with several major quick-service restaurant chains, including White Castle, Jersey Mike's, Five Guys, Noodles & Company, and Chipotle Mexican Grill. In addition, it has collaborated with prominent restaurant fintech companies such as Toast, Olo, and Square. These achievements position SoundHound as a viable candidate to replace IBM as McDonald's new voice AI-powered ordering technology partner.

However, SoundHound faces competition from other companies, including Wendy's, which is testing Alphabet's Google Cloud-powered Fresh AI platform at some of its drive-thrus. Additionally, companies like Del Taco, Rally's, Checker's, and CKE have utilized solutions offered by Presto Automation, Hi Auto tech, OpenCity, and Valyant AI. With McDonald's and Google Cloud already having a partnership in place for generative AI solutions, Alphabet could emerge as a frontrunner for securing the McDonald's deal. Nevertheless, if SoundHound can demonstrate a superior solution, it may still have a chance to win the contract.

From an investment standpoint, while winning the McDonald's deal would be a significant validation for SoundHound as a leader in the voice AI space, the company's stock remains speculative. Trading at an over 20 times forward price to sales multiple, SoundHound's shares are not considered cheap. However, the company has been experiencing rapid revenue growth and has established a substantial backlog of business opportunities. The prospect of securing McDonald's as a major client could prove to be a catalyst for further growth.

Ultimately, McDonald's decision to explore alternative voice ordering solutions presents an opportunity for SoundHound to showcase its technology. However, the impact on SoundHound AI stock remains uncertain, especially considering McDonald's recent partnership with Google Cloud. Investors should approach the investment with caution, understanding the risks associated with the company's current valuation and its early growth phase.

Note: The article is based solely on the information provided and does not represent financial advice.