SoundHound AI Faces Challenges Amid Nvidia Shift

SoundHound AI's stock plummets 60% since December highs, now amid uncertainty post-Nvidia's divestment. With revenue doubling projections, could it be a buy?

Date: 29-03-2025

AI Rating: 7

**SoundHound AI in a Challenging Position** With SoundHound AI (NASDAQ: SOUN) witnessing a significant drop of around 60% from its December peaks, investor interest has shifted towards the potential for recovery. The stock initially gained attention when Nvidia owned shares in it. However, Nvidia's recent decision to divest its shares has raised skepticism about SoundHound's growth prospects and overall business health.

Despite Nvidia's exit, the report suggests that SoundHound is positioning itself for future profitability, aiming for adjusted EBITDA profitability by the end of 2025. While this is a positive development, investors should note that it does not equate to full profitability. What's crucial here is that SoundHound demonstrated a remarkable revenue growth of 101% in Q4, with management projecting revenue between $157 million and $177 million for 2025, signaling a sustainable growth trend.

**Valuation Concerns Persist** One of the key hurdles for SoundHound remains its earlier extremely high valuation, which soared to over 100 times sales at its peak. Although the valuation has corrected to about 41 times sales, this remains elevated. If the company can maintain its growth trajectory, a future valuation around 20 times sales could come into play. Still, this suggests a significant amount of growth is already anticipated in the current price.

Moreover, the report highlights a robust revenue backlog of $1.2 billion, representing substantial future income potential based on signed contracts. This pre-existing business adds a safety net, although fresh deals could further enhance revenue estimates.

In conclusion, while SoundHound AI may appear an attractive buy at lower price levels, investors are cautioned about the risk involved. They should consider maintaining appropriate position sizes as the company works towards fulfilling its ambitious growth and profitability plans.

Stocks: SOUN