Is SoundHound AI Stock a Buy Now?

Shares of SoundHound AI (SOUN) have had a tumultuous journey over the past year. This company, which specializes in artificial intelligence (AI) voice technology, experienced a dramatic drop when its stock reached a 52-week low of $3.50 last April. However, by December, the stock skyrocketed to a high of $24.98.

This upward trend took a sharp turn in 2025, particularly after Nvidia decided to sell its stake in the company. Consequently, SoundHound's stock plummeted by more than 45% through the end of February this year.

Given this significant drop in share price, the question arises: is this a good time to invest in SoundHound stock, or does the decline signal that investors should steer clear? To determine whether the company represents a solid investment for the long run, let’s delve deeper into its business.

Positive Aspects of SoundHound

SoundHound offers a voice-activated AI platform that businesses utilize for various applications, such as enabling voice commands in vehicles, handling customer service inquiries, and managing fast-food drive-through orders.

In 2024, SoundHound revamped its business model through several key acquisitions, allowing the company to diversify its revenue streams. Previously, 90% of its income was derived from the automotive sector, but now no single industry contributes more than 25% of the total revenue. This diversification reduces the company’s reliance on any one market, making it more resilient during economic downturns in specific sectors.

SoundHound's clientele includes renowned companies like Stellantis, Hyundai, drug manufacturer Teva Pharmaceuticals, and tech giant Fujitsu. Moreover, in the final quarter of 2024, SoundHound secured one of the largest electric utility companies in the U.S. as a new client.

Due to these acquisitions, SoundHound achieved record revenue of $34.5 million in Q4, which marks a 101% increase compared to the previous year. For the entire year of 2024, the company reported total sales of $84.7 million, reflecting an 85% growth year-over-year.

Looking ahead, SoundHound is optimistic about its financial future, projecting sales between $157 million and $177 million for 2025. This forecast not only represents a significant increase from 2024's $84.7 million, but it also surpasses the company's initial estimate of $100 million announced a year ago. This upward revision highlights the strong growth trajectory the company is on.

Challenges Facing SoundHound

Despite the impressive sales growth, SoundHound has yet to achieve profitability. The company concluded 2024 with a net loss of $350.7 million, a staggering 294% increase from the loss of $88.9 million reported in 2023, largely due to costs linked to its acquisitions.

Furthermore, these acquisitions have negatively impacted SoundHound’s gross margin, as it integrated less profitable businesses. The gross margin for 2024 fell to 48.9%, a steep decline from the healthy 75.4% margin seen in 2023.

Nonetheless, SoundHound's management is optimistic about improving operational efficiencies that could lead to a recovery in gross margins. CFO Nitesh Sharan stated their aim is to return to over 70% gross margins as they find ways to trim costs.

Should You Invest in SoundHound Stock?

While SoundHound is expanding successfully, its volatile stock performance serves as a cautionary tale. The news of Nvidia’s sale of its stake in SoundHound was interpreted negatively by Wall Street, leading to a significant sell-off.

However, many believe this reaction was unwarranted. SoundHound remains a partner of Nvidia in the latter’s automotive technology initiatives and will participate in Nvidia's GTC conference in March.

Although SoundHound has not yet reached profitability, its plans to recover gross margins above 70% signal a commitment to enhancing operational efficiencies and eventually achieving profitability.

The short-term sacrifices made for gross margin have been strategic moves by SoundHound's management, as expanding the business through acquisitions can significantly bolster long-term growth potential, as reflected in its promising 2025 outlook.

Moreover, SoundHound ended 2024 with a robust financial position, boasting Q4 assets totaling $553.9 million and a cash reserve of $198.2 million. Impressively, the company reported total Q4 liabilities of $371.3 million with no debt, which demonstrates prudent financial management despite recent acquisitions.

Given these strengths, SoundHound appears to be a valuable long-term investment opportunity. The recent decline in its share price, combined with optimistic projections for 2025, has led its forward price-to-sales (P/S) ratio to align with levels seen a year ago prior to its substantial price increase.

The P/S ratio measures investor willingness to pay for each dollar of revenue, and its recent decrease suggests SoundHound stock is currently more favorably valued.

This could be a good moment to consider buying shares. However, due to the stock's volatility, it is advisable for only those investors with a high risk tolerance to contemplate investing in SoundHound AI.

Disclaimer: This article does not constitute financial advice. Always conduct your own research or consult a financial advisor before investing.

SoundHound, Investment, Stock