SoundHound AI’s Stock (SOUN) Delivers a Year of 2 Halves

SoundHound AI's stock (NASDAQ: SOUN) has suffered as the momentum trade, and speculative tech names have sold off since the start of the year.

The company are a prominent player in the rapidly evolving voice artificial intelligence sector, specialising in conversational AI interfaces for the automotive, restaurant, and customer service industries.

Down 65.20% year to date, sentiment has clearly shifted from AI names that had previously had a significant run up. Zooming out a little to the 1 year, and the story is starkly different. Soundhound's stock has gained more than 45% over the past 12 months, giving some indication as to the volatility.

This level of fluctuation is characteristic of SoundHound AI, which ranks among the top 10% most volatile stocks in the US market, with weekly price swings averaging a staggering 17.4% – more than double the broader market average.

Recent Stock Performance and Macroeconomic Pressures

• YTD Decline: SOUN shares have fallen 65.1% year-to-date, with a 25% drop in March alone. The stock traded at $8.20 on April 1, down 21.32% over the prior month, underperforming the S&P 500 (-5.59%) and tech sector (-8.94%).
• Tariff Impact: Global trade tensions, including U.S.-China tariffs, exacerbated investor risk aversion, particularly for high-growth AI stocks.
• Profitability Concerns: Despite revenue growth, the company reported a substantial Q4 2024 net loss of $351.1 million, highlighting the costs associated with rapid expansion and development.

Revenue surged 101% YoY to $34.5 million, contributing to a full-year 2024 revenue of $85 million (+85% YoY). The company initially raised its 2025 revenue outlook to $165–$170 million (+95% YoY growth target). Cumulative subscriptions/bookings reached $1.2 billion (+75% YoY), signalling future potential. The company maintained $200 million in cash and no debt, providing operational flexibility.

Customer Diversification

SoundHound has aggressively reduced reliance on its top five clients from 90% to 33% of revenue. The largest customer now accounts for only 14% (compared to 50% in 2023). Key client wins span multiple sectors:

• Healthcare: Duke Health, Wellstar Health.
• Automotive: Lucid Motors, Stellantis brands (deepening partnership).
• Government: U.S. military contract (via General Dynamics).
• Restaurants: Burger King UK, Whataburger (bolstered by the SYNQ3 acquisition).

Catalysts and Risks

• Growth Drivers: Continued expansion into healthcare, energy, and government sectors; deepening partnerships with technology leaders like NVIDIA and Qualcomm; successful integration of acquisitions (Synq3, Amelia).
• Risks: High valuation sensitivity to market conditions and interest rates; overhang and potential financial impact from the class-action lawsuit; intense competition from larger, well-resourced technology firms entering the voice AI space; execution risk in achieving ambitious growth targets.
• Nvidia Exit Impact: The February 23% selloff triggered by Nvidia's disclosure of selling its investment stake highlighted the stock's sensitivity to news involving major partners, although the operational partnership continues.
• Volatility: As noted, the stock exhibits extreme volatility (17.4% average weekly swings), making it unsuitable for investors with low risk tolerance.

The company's technological capabilities in a high-demand sector, coupled with impressive revenue growth and strategic market penetration, paint a picture of significant long-term potential. However, investors cannot ignore the considerable near-term headwinds: extreme share price volatility, substantial operating losses, and a rich valuation.