SoundHound AI Stock Crashes After Nvidia Sells Stake

SoundHound AI's shares plummeted 26.7% after Nvidia divested its stake. Investors are concerned about the company's future as its valuation remains high despite solid sales growth.

Date: 14-02-2025

AI Rating: 4

Market Reaction: SoundHound AI's stock experienced a significant drop of 26.7%, attributed to Nvidia's decision to sell its stake in the company. This abrupt plummet raises concerns about investor confidence and the future outlook of SoundHound AI in the competitive AI market.

Nvidia's Divestment: Nvidia sold its roughly 1.71 million shares of SoundHound, which only constituted a minor portion of Nvidia's total market cap of approximately $3.36 trillion. Thus, while the sell-off has negatively impacted stock prices, the immediate material impact on SoundHound's business is argued to be minimal.

Valuation Concerns: Despite the sales growth, SoundHound AI's valuation remains substantial at about 26.5 times this year's expected sales, warranting concern over its long-term sustainability in light of the volatility seen in its stock. However, its impressive sales growth indicates potential for long-term investors.

Risks and Opportunities: The divestment by Nvidia may signal a strategic shift, prompting investors to evaluate whether SoundHound AI can remain competitive within the rapidly evolving AI landscape. For risk-tolerant investors, the recent sell-off may present a buying opportunity, whereas risk-averse investors may look to other sectors for safer investments.

Stocks: NVIDIA SOUN