Is SoundHound AI a wise investment choice after its recent decline? Current news suggests a positive outlook, even if the stock’s performance indicates otherwise.
Back in December, I identified SoundHound AI (SOUN +2.09%) as a compelling buy opportunity. However, as of January 5, the stock has declined by 8% since then. Despite this downturn, I’ve been consistently encountering positive news regarding this voice command technology specialist during this timeframe. In fact, my interest in SoundHound AI has only intensified as I analyze the underlying fundamentals.
Image source: Getty Images.
Discover How SoundHound AI Pioneered Voice Recognition Technology
It’s important to recognize that SoundHound AI has been at the forefront of artificial intelligence development for audio analysis for nearly two decades. The innovative Midomi app, which was later rebranded as SoundHound, was one of the first applications to identify songs captured by your smartphone’s microphone back in 2006. Over the years, the company has expanded its use cases and clientele, ultimately opting for a path toward commercial success through a merger with a special purpose acquisition company (SPAC) in 2022.
The stock experienced a significant surge in 2024, particularly after Nvidia (NVDA 0.47%) made a strategic investment in SoundHound AI. Notably, Nvidia’s CEO, Jensen Huang, has been mentoring SoundHound AI’s founder, Keyvan Mohajer, for the past decade. Currently, both companies are collaborating to develop voice control systems on Nvidia’s cutting-edge hardware, enabling functionality without the need for an active internet connection.
Furthermore, it is crucial to understand that SoundHound AI’s financial outcomes are on the verge of a transformation. The company possesses a substantial backlog of long-term contracts projected to generate over $1.2 billion in revenue within the next seven years. Simultaneously, this backlog is rapidly expanding. The upcoming Q4 2025 report in February is expected to reveal an updated backlog figure, and I anticipate significant growth in this essential indicator of future sales and profitability.
Analyze the Disconnect: Positive News vs. Declining Stock Performance
This information might seem familiar. Investors in SoundHound AI have recognized the connection with Nvidia for some time, and the existing order backlog is widely known.
Nevertheless, SoundHound AI’s stock has dropped by 38% over the past three months, despite a consistent stream of favorable news for shareholders:
- On December 10, SoundHound AI’s platform successfully integrated with OpenTable, a subsidiary of Booking Holdings (BKNG 0.33%) since 2014. This partnership added over 60,000 OpenTable locations to SoundHound AI’s conversational AI system. Users can now instruct their vehicle on their destination and dining preferences, completing reservations seamlessly without needing paperwork or phone calls.
- The following day, CFO Nitesh Sharan showcased SoundHound AI’s technological edge at an industry conference. Competing voice AI systems from major players like OpenAI, Microsoft, and Google exist, yet SoundHound AI’s tools consistently outperform them in speed and accuracy, especially in noisy environments like drive-throughs, highways, and bustling call centers.
- This week, the company unveiled the Amelia 7 agentic AI platform at the CES 2026 conference. This powerful orchestration tool integrates multiple AI assistants into a cohesive user experience, allowing businesses to create custom vehicle platforms utilizing proprietary data and in-house AI agents.
One would expect these advancements to positively impact the stock price, yet SoundHound AI’s stock performance tells a conflicting story.
Today’s Change
(2.09%) $0.23
Current Price
$11.23
Important Market Data and Insights
Market Cap
$4.7B
Day’s Range
$10.74 – $11.28
52wk Range
$6.52 – $22.17
Volume
28M
Avg Vol
33M
Gross Margin
30.02%
Understanding the Risks and Recognizing the Tremendous Growth Potential
I acknowledge that investing in SoundHound AI carries inherent risks. The existing order backlog does not guarantee immediate revenue; the company must fulfill numerous agreements to secure the anticipated earnings. Currently, the company is facing significant financial challenges and has been known to raise additional funds by issuing more shares. Over the past four quarters, the diluted share count has increased by 14%, while net losses escalated from $21.8 million to $109.3 million.
However, the potential for growth that SoundHound AI is poised to encounter is extraordinary, and revenues are beginning to materialize. In just a few years, what is currently a modest revenue stream could evolve into a substantial influx. While the stock might seem overpriced at present, this $4.3 billion market cap could appear remarkably undervalued as the voice control industry continues to mature. From my perspective, SoundHound AI represents an exceptional investment opportunity right now.
Anders Bylund has positions in Alphabet, Nvidia, and SoundHound AI. The Motley Fool has positions in and recommends Alphabet, Booking Holdings, Microsoft, Nvidia, and SoundHound AI. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
