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SoundHound AI Faces Challenges as Stock Plummets 70%

SoundHound AI (NASDAQ: SOUN) has seen a dramatic 70% decline in 2025, presenting challenges amid slowing AI stock momentum. Investors are questioning if this high-growth stock can regain its previous highs amid ongoing economic uncertainties.

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AI Rating:   5
Stock Performance: SoundHound AI has recently experienced a significant drop of approximately 70% from its all-time high of $24, currently trading around $7. This sell-off reflects market volatility, particularly among AI stocks, where investor sentiment is shifting from aggressive growth to more conservative picks.

Revenue Growth Potential: The company reported a remarkable 101% revenue increase, reaching $34.5 million in the fourth quarter, with growth projections for 2025 estimated between $157 million and $177 million, representing 97% growth. However, these forecasts are now in question due to external economic pressures.

Valuation Considerations: At its peak, SoundHound's price-to-sales ratios were excessive, reaching over 110 times sales, reflecting unsustainable expectations. As the stock trades around 30 times sales, it could be deemed expensive relative to most software peers, which typically trade between 10 and 20 times sales. However, if management maintains its revenue guidance, there could be a significant upside if the valuation adjusts more favorably.

Investor Outlook: The current economic climate poses challenges, particularly with tariffs potentially impacting future growth. Investors may need to exercise patience, as re-establishing a $24 share price will require substantial revenue growth that may not materialize swiftly. Nonetheless, should SoundHound exceed revenue expectations or provide optimistic guidance for 2026, the stock may present a lucrative opportunity for long-term investors.
Stocks:  SOUN