Why SoundHound Stock Plummeted Today

On Monday, shares of SoundHound AI (SOUN -11.17%) fell sharply. The stock dropped by 11.2% by the end of the trading day, hitting a low of 12.9% earlier that day. This decline came amid a broader market dip, with the S&P 500 and Nasdaq composite losing 1.5% and 3.1% respectively.

SoundHound's stock performance has faced challenges since its presentation at the CES 2025 event, plummeting nearly 30% from the start of January. However, the situation worsened on Monday as the market responded negatively to news regarding the entry of a new competitor from China, called DeepSeek.

SoundHound's Presentation at CES

The Consumer Electronics Show (CES) is a key event in the tech industry where companies showcase their latest innovations. SoundHound's presentation was highly anticipated, but unfortunately, their demonstration of an in-car voice "commerce" platform did not meet expectations. Investors were disappointed as the platform seemed to offer little value while also increasing costs and power consumption, leading to a reduction in confidence in the company.

Concerns Over New Competitor DeepSeek

The lackluster performance at CES made SoundHound particularly vulnerable to the news about DeepSeek, a new player in the AI field created by a Chinese firm. Despite not having the same level of funding and resources available to American companies, DeepSeek has developed an AI model that competes with those from Amazon and OpenAI. This development has rung alarm bells for investors, who fear that demand for U.S. technology might decrease and that U.S. companies could fall behind in this rapidly evolving sector. As a result, SoundHound along with other AI stocks experienced a significant drop in value amid growing market concerns.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

SoundHound, Stocks, AI