Down Over 50%, Should You Buy the Dip on SoundHound AI Stock?
SoundHound AI stock has dropped by over 50%, prompting investors to consider buying the dip. The sharp decline has created an opportunity for investors looking to capitalize on the stock's potential rebound. Despite the significant drop, some analysts believe that SoundHound AI stock may be undervalued at its current price. Investors are advised to conduct their own research and consider their risk tolerance before making any investment decisions.
SoundHound AI: A Closer Look at the Investment Thesis
Shareholders of SoundHound AI (SOUN -1.11%) experienced a rollercoaster ride in the stock market in 2024 and 2025. The stock surged by 836% in 2024 but has since plummeted by 55% from its peak. The fluctuation in SoundHound's stock price has been significantly influenced by Nvidia.
In early 2024, Nvidia's investment in promising AI stocks, including SoundHound AI, caused a surge in SoundHound's stock price. However, in early 2025, when Nvidia divested its stake in the company, the stock plummeted. This highlights the risks of basing investment decisions on the actions of other investors rather than having a well-thought-out investment thesis.
Why Investors are Interested in SoundHound AI Stock
SoundHound AI specializes in providing voice-assistant technology to various industries, such as automotive and restaurants. With two decades of experience, the company is considered a pioneer in the field. Its revenue growth has been impressive, with an 85% increase in full-year revenue in 2024 and a remarkable 151% year-over-year growth in the first quarter of 2025.
Investors are drawn to SoundHound due to its significant growth potential. The company operates in a vast market that it has yet to fully capture, with a projected market opportunity of $140 billion. Despite its current market share being less than 1%, the company's rapid growth trajectory indicates substantial future potential.
Furthermore, SoundHound is making strides towards profitability, with management aiming to achieve profitability by the end of the year based on adjusted EBITDA. While the company is not profitable yet, its strong financial position with $246 million in cash and no debt bodes well for its future prospects.
Challenges and Considerations for SoundHound AI Stock
While SoundHound AI presents a compelling investment case, there are challenges to consider. The company's "white-label" branding strategy may not provide a significant competitive advantage, as larger players in the industry are also capable of incorporating branding into their products.
Additionally, the rapid advancements in AI technology pose a threat to SoundHound's market position. The emergence of new AI applications and increasing competition from tech giants could challenge SoundHound's dominance in the voice-assistant space.
Investors should be mindful of the intensifying competition in the AI industry and carefully assess SoundHound's ability to compete against established players. While the stock may present a buying opportunity following its recent decline, cautious investors may opt to observe how competition evolves before making investment decisions.