Is SoundHound AI Stock a Buy Now?

SoundHound AI (SOUN) is experiencing a challenging year in 2025, with its shares declining over 57% as of February 25. The stock took a notable hit after it was announced that semiconductor leader Nvidia had sold its stake in SoundHound.

SoundHound initially gained attention in February 2024 when it was revealed that Nvidia held a small investment in the company valued at $3.7 million. Following this news, SoundHound's stock price saw significant fluctuations, especially rising sharply in the fourth quarter of 2024. Therefore, the selling of Nvidia's shares for a profit triggered panic among many investors.

But does this recent drop represent a buying opportunity for those interested in this fast-growing AI company? Let's explore further.

Nvidia's Sale: A Non-Issue?

Currently, SoundHound has a market valuation of about $4 billion. Hence, Nvidia's stake wasn't substantial enough to warrant such a drastic sell-off. Some investors might speculate whether Nvidia's decision to exit suggests a lack of confidence in SoundHound's future growth prospects, especially given its high valuation. This perspective may hold some truth, as SoundHound's stock has previously been trading at elevated levels due to a significant surge in price.

Despite the recent pullback, SoundHound still has a relatively high price-to-sales ratio of 47, indicating it remains priced on the higher side. However, this is a reduction from the 90 price-to-sales ratio it held at the end of 2024, suggesting that the stock is now more attractively priced for potential investors. Additionally, SoundHound's robust growth trajectory could help justify its higher valuation over time.

So, should investors looking for growth in the AI sector consider adding SoundHound to their portfolios right now?

Solid Growth Ahead

SoundHound is set to publish its fourth-quarter results for 2024 on February 27. Impressively, the company’s forecast for 2025 projects an 82% increase in revenue compared to the previous year, showing a notable improvement over the 47% revenue growth seen in 2023.

The midpoint of SoundHound's revenue guidance for 2025 is around $165 million, almost doubling its revenue from 2024. Although analysts predict a potential slowdown in growth for 2026, it’s possible that SoundHound could exceed market expectations next year. The company's order backlog now stands at over $1 billion, especially following its acquisition of enterprise AI software provider Amelia, which surpasses its expected revenue for both 2024 and 2025.

Moreover, SoundHound's voice AI solutions are attaining substantial traction in the market, with a strong customer base in sectors like automotive and restaurants. After the Amelia acquisition, there's a visible push to attract more clients and branch out into new areas.

Recent announcements highlight continued adoption of SoundHound's technologies, with companies like Kia integrating its solutions into their vehicles. SoundHound operates within a thriving voice AI market projected to increase nearly 20-fold from 2024 to 2034, potentially generating close to $48 billion in annual revenue within a decade.

Consequently, investors willing to invest at a premium for SoundHound's exciting growth prospects may find significant gains in the long run. The recent decrease in stock price could offer a buying opportunity before an anticipated positive earnings report pushes the stock higher.

Investors should stay cautious, however, as SoundHound’s stock has shown volatility over the past year, and its high valuation could result in considerable fluctuations in stock price.

Note: No position in stocks mentioned

Stock, Growth, Market