With a nearly 50% decrease from its peak, is SoundHound AI's stock an attractive investment option at the moment?
Investing in SoundHound AI (SOUN) stocks can be a rollercoaster ride for investors. The voice AI company experienced an incredible 836% surge in 2024 after partnering with Nvidia, but 2025 has seen a different story. As of Jan. 20, the stock has plummeted more than 31%. Some investors might be cashing in their profits, while others are questioning the stock's valuation.
At its current price, shares of SoundHound AI are trading nearly 50% below its 52-week high of $24.98. Is this a golden opportunity for investors, or the start of a larger sell-off?
A Stock with Mad Swings and a Questionable Value
Volatility is not new for SoundHound AI investors. Its 30-day average trading volume has fluctuated widely – from less than 8 million to nearly 112 million – in the past year.
Besides its unpredictable nature, the stock is also incredibly expensive. It trades at over 60 times its trailing revenue and 17 times its book value. This price can often soar with hype, instead of being fueled by solid fundamentals.
For potential investors, high volatility and a massive premium mean they have to brace for significant and unexpected changes in value. It's a wild ride that might not suit risk-averse investors.
SoundHound AI: Incurring Big Losses and Burning through Cash
Investors could be excited about the prospects of SoundHound AI's voice AI system – which can be used in various industries, from cars to drive-thrus, to improve efficiency.
Despite this, the business faces obstacles. The market for voice AI is highly competitive, and without strong fundamentals and resources, SoundHound might struggle to secure market share.
During its latest financial period, SoundHound incured operating losses worth $33.8 million – more than double its previous year's loss of $14.5 million. Over the past nine months, the company has burned through $75.8 million just covering its day-to-day operations. Being low on cash, only $135.6 million, makes things difficult.
For SoundHound to grow, it will likely need to pour money into sales and marketing, which can make it even less likely to turn a profit.
Is the Sell-off Just Getting Started for SoundHound AI?
The stock's early decline may seem like a buying opportunity, but it could be even more dangerous. Its parabolic rise in 2024 was significant, and this recent price drop might simply be an overcorrection.
SoundHound AI is a volatile stock, so investors should pay close attention to how risky an investment it truly is. It can be highly sensitive to news related to the company's performance and overall market sentiment.
SoundHound's fundamentals are far from sterling, and unless they improve drastically, investors might be better off avoiding the stock entirely.
In light of SoundHound AI's recent financial struggles and questionable valuation, some investors might be reconsidering their strategy for investing their money in this finance domain. With the stock trading at a significant discount to its 52-week high and the company burning through cash, potential investors should cautiously assess the risks involved before investing.
Given SoundHound AI's history of volatility and its high premium in relation to its revenue and book value, some financial analysts might recommend holding off on investing until the company demonstrates stronger fundamentals or stability in its stock price. Alternatively, others might view the current market situation as an opportunity to purchase shares at a discounted price, with the hopes of profiting from a potential rebound.
