New ST play (5/21 11:41AM) - $CRNC

Cerence $CRNC

In our robotics basket, one of our running thesis is the idea that automotive technology companies have cross-applicable platforms to a world of physical AI. Modern cars are robots. Those cars engaging with people and their environments has direct relevance to "robots" doing the same thing.

Our first two picks in this vein were $VLN @ $1.57 and $BB $6C @ $.87 both of those picks have worked *extremely well* so far.

The company currently trades at a very reasonable valuation (13 forward P/E, 6.5x FCF, 1.5x sales) with an explosive chart on all time frames (daily consolidating around 200sma, weekly consolidating around 50sma).

In 2025, Cerence technology was used in *52% of all automobiles produced worldwide*. Yes... you read that right, over half of every single car produced. When you interact with a car with your voice ("Hey Mercedes", "Hey BMW", "Hey Audi", "Hey Jeep", etc.) Cerence is most likely involved.

So, what's the AI angle? Voice AI is Cerence’s core market. The company’s historical competency is speech-driven control in noisy, embedded, real-world environments.

That matters because the car is one of the most difficult consumer environments for voice AI:

- background road/wind/cabin noise
- multiple passengers speaking from different seats
- intermittent connectivity
- safety-sensitive user commands
- multi-language/localization requirements
- OEM-specific cockpit APIs
- privacy and data-retention constraints

Many of these issues are cross-applicable to robotics. Cerence’s edge/cloud hybrid architecture is well-suited to this domain. Pure cloud AI can be more flexible, but cloud-only systems can fail when connectivity is poor or latency is unacceptable. Pure edge systems are more reliable and private but historically less capable. Cerence is trying to combine both.

The company is leaning into this cross-application. On the last earnings call:

*"Outside of automotive, consistent with what we have said in the past, we are concentrating our efforts on high-value verticals where our strength in edge solutions, quality, reliability, privacy, and a domain-focused approach matter most, and where we believe we have a clear right to win.

Specifically, we are prioritizing dealership AI, commercial and industrial operations, and select IoT and robotics applications. Rather than selling voice as a standalone component, our approach is to deliver full vertical solutions combining voice, LLMs and SLMs, orchestration, and workflow integration into purpose-built vertical packs."*

Cerence xUI is directly relevant here. Management describes xUI as a next-generation AI interface that can use Cerence’s CaLLM models, third-party LLMs, third-party agents, real-time data, and vehicle context. The company said in Q1 FY26 that it showcased next-generation LLM-powered experiences and new AI agents serving users across the vehicle purchase and ownership journey; in Q2 FY26, it said xUI-powered vehicles were entering production

Cerence’s capabilities — far-field audio, speech understanding, context-aware interaction, edge inference, cloud orchestration, wake-word, multi-zone awareness, and task execution — are portable to other embodied interfaces. The company already says its technology can apply beyond passenger cars to areas like two-wheelers, commercial trucks, TVs, smart watches, kiosks, and industrial automation markets. That means that the platform has clear cross-application potential for *physical devices* in general.

This name will *cross-apply* to our robotics + voice AI basket, but will be listed as Voice AI because that is the most relevant angle here for the current tech stack.

Filled $10C Aug 21 '26 @ $1.85 avg. 1.5% weighting.