A Promising Tech Stock to Watch for 2025: SoundHound AI

Right now, it may not seem like the best time to buy shares of SoundHound AI (SOUN 8.60%), a rising star in the tech world. However, with a potential market correction coming soon, this could be the perfect opportunity to invest in the future of voice technology.

Planning for the future is crucial.

SoundHound AI stands out as one of the most exciting hypergrowth stocks available today. Though its current stock price appears overheated, a correction could make it a compelling buy in 2025. The company has established itself in the industry, and its prospects remain strong even if the stock is currently not a good purchase.

As such, I have chosen to hold off on purchasing SoundHound AI at the moment, having previously sold about half of my shares in December to capitalize on recent gains. I believe that once the stock price stabilizes, it could be a valuable addition to my portfolio.

The Promise of SoundHound AI

The outlook for SoundHound AI is very promising.

Voice technology is becoming increasingly critical across various sectors. Popular applications include voice-activated menus in drive-throughs and phone systems, as well as infotainment systems in vehicles. Major technology companies like Apple and Amazon have their own voice recognition solutions, with products like Siri and Alexa leading the way.

Despite the competition from these tech giants, SoundHound AI continues to secure contracts for voice solutions across multiple industries. The company has established long-term agreements with numerous automakers and fast-food businesses, and its portfolio of products is expanding quickly. Just recently, SoundHound AI integrated its two main technologies to enable drivers to place food orders via their car audio systems.

This small but mighty company certainly has an exciting trajectory ahead, and I am eager to see how it evolves in the coming years.

Current Valuation Concerns

Nevertheless, I am not buying SoundHound AI shares right now. The price is simply too high. After selling part of my stake in December, I locked in profits from a speculative surge in the stock's price.

The hype surrounding SoundHound AI greatly increased its visibility, especially in meme stock circles, leading to a significant spike in its stock price. Initially fueled by high short-seller interest, the stock reached new heights, only to decline sharply in subsequent weeks, trading around 47% lower than its peak.

I look forward to re-entering the stock at a better valuation, but that moment has yet to arrive. Earlier in 2024, reports of a potential investment by Nvidia sparked talks about a possible acquisition or partnership but these have not come to fruition. Additionally, SoundHound AI's stock never fully reached the $9 mark during that surge.

Despite my faith in SoundHound AI's growth potential, I recognize the risks involved. The stock's high valuations, which peaked at a price-to-sales ratio of 110.5 on December 26, are concerning. Although it has dropped to 73 times sales as of January 13, that’s still too high for my comfort.

I would consider investing in SoundHound AI again if the stock price retraces to the single-digit price points. Moreover, I am closely monitoring the company’s performance. A recent quarterly report showed encouraging revenue increases and smaller net losses, along with strong guidance for revenue growth over the next two years.

Waiting for the Right Moment

SoundHound AI's business appears to be progressing well. I anticipate that the recent fever around meme stocks will cool off soon, bringing prices down further.

I am prepared to repurchase SoundHound AI shares, but I will only move if the price continues to decline to the $6 to $7 range. Of course, everyone’s investment strategy may differ, so it’s essential to conduct personal research before making any decisions regarding such a rapidly evolving company.

In conclusion, while SoundHound AI has a bright future ahead and potential for significant growth, timing your entry price will be crucial in making a wise investment choice.

Tech, Investment, Stocks