SoundHound's Stock Drops Following Nvidia's Departure as Shareholder. Should Shareholders Consider Selling Too?
SoundHound AI's shares took a dive following the news of Nvidia exiting its investment in the voice AI company. The stock has plummeted over 40% this year, yet it's still up over 385% from its previous year's high. Nvidia's profitable exit from its position in SoundHound may not come as a surprise, given the stock's parabolic price rise at the end of 2024.
SoundHound operates a cutting-edge AI voice platform, enabling voice assistants to communicate with users in a more natural, conversational manner. The technology, a combination of speech-to-meaning and deep-meaning-understanding technology, processes speech in real time and recognizes user intent. This voice platform serves as a source of both product royalties and subscriptions, with the company seeing a significant portion of its revenue coming from these two income sources.
SoundHound has made significant strides in the automobile and restaurant industries, with over 20 auto brands, including Hyundai and Kia, among its clientele. The company aims to increase its presence in both existing and new industries by 2030, with a focus on becoming the premier AI-powered commerce voice ecosystem.
Despite its potential, the stock's valuation is still on the high side, trading at a forward P/S multiple of 21 times, although considerably lower compared to its peak late in 2024. This valuation is reasonable given the projected revenue growth of about double in 2025, but the stock's future growth will depend on how revenue settles in the years following.
Veteran investors may consider taking partial profits in the stock at present due to the speculative nature and volatility of the investment, as further fluctuations in the stock price are to be expected.
Based on technical analysis, SoundHound AI's stock is currently near oversold territories, displaying a bearish sentiment and experiencing short-term volatility. Meanwhile, fundamental analysis has pointed out profitability concerns, as the company remains unprofitable and has a negative EPS (TTM) over the past year.
On the other hand, analyst predictions for the long term are promising, with the company's significant growth potential in the rapidly expanding AI sector. However, the immediate impact of Nvidia's exit and SoundHound AI's current financial performance remain crucial factors to monitor.
- Despite the dip in SoundHound's stock following Nvidia's exit, investors looking at the finance sector might still consider investing in 2025 due to the company's projected revenue growth and significant potential in the AI sector.
- SoundHound's revenue model is primarily based on product royalties and subscriptions from its AI voice platform, which is widely used in the automobile and restaurant industries, such as Hyundai and Kia.
- While SoundHound AI's stock is currently undervalued according to technical analysis, its unprofitability and negative EPS (TTM) raise concerns, making it a risky investment for some, even considering its high-growth potential in financing and investing in the AI ecosystem.
- Nvidia's decision to exit its investment in SoundHound could impact the stock's future growth, but the company's focus on increasing its presence in various industries and becoming the premier AI-powered commerce voice ecosystem is likely to influence its financial performance by 2030.
