Is SoundHound AI Stock a Buy Now?

SoundHound AI (NASDAQ: SOUN) is facing a challenging 2025 as its stock price has plummeted over 57% as of February 25. This downturn was significantly impacted when it was revealed that Nvidia, a major player in the semiconductor industry, had sold its stake in the company.

SoundHound first gained attention in February 2024, following news that Nvidia held a stake worth $3.7 million. After a remarkable rise in the fourth quarter of 2024, the news of Nvidia's exit from SoundHound caused many investors to panic and sell off their shares.

The question now is whether this drop represents a buying opportunity for those interested in growth-oriented AI stocks.

Nvidia's Sale: Not a Major Concern

Currently, SoundHound's market capitalization stands at just over $4 billion. Given this valuation, Nvidia's stake wasn’t significant enough to cause such a drastic sell-off. However, some investors may interpret Nvidia's exit as a lack of confidence in SoundHound's future growth, particularly given its previous high valuation.

Despite the recent decline, SoundHound's stocks are still trading at a price-to-sales ratio of 47, which, while high, is an improvement from its ratio of 90 at the end of 2024. This indicates that investors may now have access to the stock at a relatively lower valuation.

Could this make SoundHound a viable option for investors looking to add an AI stock to their portfolios?

Promising Growth Ahead

On February 27, SoundHound is set to release its fourth-quarter results for 2024. Preliminary guidance suggests that the company's revenue is expected to grow by an impressive 82% in 2025, a notable increase from the 47% growth it experienced in 2023.

The projected midpoint for 2025 revenue is around $165 million, which could nearly double the company's 2024 revenue. Although some analysts predict a slowdown in growth for 2026, SoundHound's current trajectory may exceed these expectations.

SoundHound claims to have a backlog of combined orders exceeding $1 billion, particularly after acquiring the enterprise AI software firm Amelia. This backlog significantly surpasses the revenue projections for 2024 and 2025, indicating strong future demand.

The company’s voice AI solutions are gaining traction in sectors like automotive and hospitality, with established customers such as Kia integrating its technology into their vehicles. The market for voice AI is expected to grow dramatically, potentially reaching $48 billion annually over the next decade.

For investors willing to embrace the inherent volatility of stocks like SoundHound, this recent decline may present an attractive buying opportunity. If the upcoming earnings report aligns well with current expectations, it could lead to a resurgence in the stock price.

However, potential investors should be cautious about SoundHound's volatile history and its high valuation, which may lead to fluctuations in stock prices.

No positions in any mentioned stocks are held by the author. The analysis does not necessarily reflect positions held by financial advisory firms.

AI, Stock, Growth