SoundHound AI (NASDAQ:SOUN) is a leading maker of artificial intelligence voice software. The company’s conversational AI is actively being used in vehicles and restaurant settings to power voice command features and improve efficiency
Despite being a fast-growing AI company with real-world customers and a proven business model, SoundHound has seen its shares tank in the early months of 2025. SOUN is down more than 35 percent over the last three months, though it is still more than 70 percent ahead of where it traded at this time last year. What’s causing SOUN shares to fall, and will SoundHound AI stock recover later in 2025?
The Bull Case for SoundHound
Among hedge fund insiders if you can find a moat in a company, it’s one of the first signs of possibly landing on a sustainable investment that you can hold for a long time and when it comes to SoundHound AI the installed customer base is that proxy.
A loyal clientele essentially translates to a less risky bet than some new up-and-coming startup trying to emulate it. And when it comes to SOUN, it has a number of large, successful businesses on its customer list. For example, seven brands of vehicles from auto major Stellantis used SoundHound’s automotive AI as of the end of 2024. The company’s restaurant tools, meanwhile, are currently used in such chains as the UK branch of Burger King and Whataburger.
SoundHound is also attempting to position itself at the forefront of agentic AI. This type of AI uses complex reasoning to complete multi-step tasks beyond the simple ones that most artificial intelligence is currently used for. By getting out in front of agentic AI, SoundHound hopes to benefit as businesses adopt more advanced AI tools.
There is one unusual bull view that has cropped up which is tariffs will lead to a lot of companies looking for ways to cut costs and AI firms will offer cheaper ways versus existing labor, thereby benefiting SoundHoud.
The true extent and impact of tariffs imposed by the Trump administration remain to be seen, but there’s at least a reasonable argument to be made that advanced AI tools could benefit from the more challenging environment created by restricted trade.
Why Did SoundHound’s Stock Fall?
What’s a little unusual about SoundHound’s share price dip is that it wasn’t a fast sharp tumble but rather a 3-phase collapse over many months.
First the team seemed to come up short at the Consumer Electronics Show which severely underwhelmed investors. This was around the same time as DeepSeek’s announcement that it had developed a new and more efficient way to train AI algorithms, which also put pressure on SOUN as AI stocks in general sold off.
The next big hit came in mid-February, when NVIDIA filed its 13F for Q4, announcing it had sold shares of SoundHound AI, a move that further undermined investor confidence in the stock.
Then, most recently, management disclosed to the chagrin of shareholders that it would be late in filing its next 10-K with the SEC. Put all the ingredients into the mix and the share price took a big hit.
Cumulatively, these developments have pressured SOUN shares and created concern among investors. These news stories, however, are only one side of the coin. The good news for SOUN shareholders is that things begin to look a good deal brighter when we examine how the company itself is faring.
How Is SoundHound Performing?
Although the possibility of accounting issues at SoundHound raises some doubts about its reporting, we can still get a sense of how the company’s performance looks from its most recent earnings report. In 2024, revenue grew at an extremely rapid rate of 85 percent year-over-year and reached a total of $84.7 million. Adjusted EPS, meanwhile, advanced from ($0.25) in 2023 to ($0.20).
Looking forward to 2025, management sees a continuation of high revenue growth rates. For the full year, the company has issued guidance of $157-$177 million. This high rate of revenue growth could put renewed upward pressure on SOUN shares, especially if the company can continue making gradual progress toward positive earnings on at least a non-GAAP basis.
Another very positive aspect of SoundHound AI is its balance sheet. As of the end of 2024, the company held $198 million in cash and cash equivalents. With no debt, this gives SoundHound AI the ability to freely invest in new growth initiatives and a measure of protection against unexpected disruptions to its business.
Has SOUN Become Undervalued?
Even after falling more than 35 percent, shares of SoundHound AI don’t exactly look cheap. The stock trades at 21 times book value and 39 times sales, both of which will require SoundHound to keep up its incredible streak of growth in order to justify. With the company still not generating positive earnings, revenue growth will likely be the main metric by which investors decide to buy, hold or sell the stock.
Analyst forecasts, however, remain deeply positive for SOUN. The average price target for the stock is $14.57, nearly 50 percent higher than the latest closing price of $9.74. It’s also worth noting that the lowest price target for the stock is $8, suggesting an asymmetrical view of the risks and rewards of SoundHound where analysts are concerned.
Will SoundHound AI Stock Recover?
Right now, the chances for a SoundHound recovery seem fairly good. The company’s selloff has mostly been news-driven, but its fundamentals remain sound and its revenues are still growing at a blistering pace. Even with its valuation still quite high, there’s a decent chance that SOUN will gradually recover some of the ground it has lost as long as more concrete problems don’t emerge in the future.
SoundHound could also benefit from the Federal Reserve’s expected interest rate cut in June. Lower rates tend to favor high-growth companies like SoundHound AI, and pressure from a weakening labor market is projected to push the Fed to make at least one rate cut this year. Though the effect could be modest, SoundHound and other AI stocks could see an additional bump if and when this cut arrives.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
