U.S. stocks have staged a powerful relief rally since April, with the tech-heavy Nasdaq Composite now within 1% of its all-time high. But not all tech names are participating in the rebound.
Shares of SoundHound AI (SOUN) have lost steam amid waning AI hype and the headline-grabbing exit of major backer Nvidia.
SOUN stock remains under pressure, trading below $10 and down 51% year-to-date. Since peaking in December, shares have plunged 61%, pushing the company’s market cap below $4 billion, according to Yahoo Finance data.
By comparison, the Nasdaq Composite has gained over 31% from its April low, underscoring SoundHound’s divergence from broader tech sentiment.
Despite its steep sell-off, SoundHound still trades at lofty valuations, with a forward price-to-earnings ratio of 137, suggesting investors are paying a premium for long-term growth that may take years to materialize.
The company reported 151% revenue growth in the first quarter, generating $29.1 million in sales.
Management expects 2025 revenue to reach up to $177 million. However, adjusted losses totaled $22.2 million in the latest quarter, highlighting that profitability remains a distant goal.
One bright spot: SoundHound maintains a healthy balance sheet, with $246 million in cash and no debt.
Nvidia’s exit marked a turning point for SoundHound
The stock’s slide accelerated after Nvidia disclosed it had sold its entire 1.73 million-share stake in SoundHound, a position once seen as a key endorsement of the company’s potential in AI.
Nvidia’s divestment, made near the end of 2024, became public in February through a 13-F filing with the U.S. Securities and Exchange Commission, just weeks after SOUN hit record highs.
Whether Nvidia’s move was opportunistic profit-taking or a signal of deeper concerns, it sapped investor confidence and marked a sharp turning point in SOUN’s short-term trajectory.
Despite recent volatility, SoundHound maintains a strong position in a rapidly expanding sector. The conversational AI market is projected to be worth over $14 billion in 2025 and could surpass $41 billion within five years, according to The Research Insights.
As large language models and machine learning continue to improve, adoption across industries is expected to rise.
SoundHound has already secured deals with major automakers like Mercedes-Benz, Honda, and Hyundai, while its voice-enabled ordering tech has gained traction among restaurant brands.
But with the glow of Nvidia’s backing now gone, investors are watching closely to see if SoundHound can stand on its own in a crowded and increasingly competitive AI landscape.
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