SoundHound AI Faces 57% Drop Amid Nvidia's Stake Sale

SoundHound AI's shares plummet 57% as Nvidia exits with profit. Investors question the future as revenue is projected to increase 82% in 2025 despite turbulent market conditions.

Date: 26-02-2025

AI Rating: 6

Market Performance and Stakeholder Actions
SoundHound AI has experienced a significant decline in its stock price, dropping more than 57% as of February 25, 2025. This downturn is partially attributed to semiconductor giant Nvidia selling its stake in SoundHound, which, despite not being large in terms of market cap, has struck panic among investors. The current market cap of SoundHound is over $4 billion, indicating Nvidia's stake of $3.7 million was relatively minor. Nonetheless, Nvidia’s decision to sell could hint at its expectations regarding SoundHound's future performance, raising concerns surrounding the stock’s valuation and market position.

Valuation Insights
SoundHound's price-to-sales ratio stands at 47, a notable decrease from 90 at the end of 2024, suggesting that the stock is becoming more affordable after the recent pullback. This valuation change presents an interesting opportunity for investors looking for growth stocks at more reasonable prices.

Revenue Growth Expectations
Looking ahead, SoundHound has projected a remarkable 82% growth in revenue for 2025, significantly up from the 47% growth achieved in 2023. With a midpoint revenue guidance of $165 million for 2025, it indicates a substantial leap compared to 2024 figures. This positive outlook is buoyed by a current order backlog exceeding $1 billion, far surpassing expected revenue for the upcoming years.

Market Position and Future Growth
SoundHound is also establishing itself firmly in the voice AI solutions market, gaining a robust customer base in sectors like automotive and hospitality. Partnerships with major players such as Lucid Motors and Kia further fortify its market presence, which could lead to substantial growth as the industry broadens considerably in size in the next decade.

In conclusion, while the drop in stock price might be alarming, the underlying growth fundamentals suggest a potential rebound. The current bearish sentiment can be seen as a buying opportunity, particularly if the upcoming fourth-quarter earnings report meets or exceeds market expectations. Investors need to remain cautious, however, given the stock’s historical volatility and its high valuation metrics.

Stocks: SOUN NVDA