HomeMarket NewsThe Resonance of SoundHound AI: Deciphering the Stock Plunge

The Resonance of SoundHound AI: Deciphering the Stock Plunge

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SoundHound AI (NASDAQ: SOUN) witnessed a plunge in its stock price on Monday, slipping by 7.5% as per S&P Global Market Intelligence data. In a volatile trading session, the stock oscillated between being up by 2.1% and down by 11.7%. In contrast, the S&P 500 index closed the day with an increase of approximately 0.8%.

While no specific news directly impacted SoundHound’s stock decline, the company’s share price followed the erratic trajectory of other prominent artificial intelligence (AI) stocks such as Nvidia and Super Micro Computer, ultimately dragging down the audio-tech company’s valuation.

SoundHound in the Echo of AI Pioneers

Throughout this year, the movements in SoundHound’s stock price have mirrored the ups and downs of prominent AI stocks like Nvidia and Supermicro. This symbiotic dance contributed to a remarkable 288% surge in the company’s share price in 2024 so far. However, this interdependence has also ushered in heightened volatility.

On the recent market stage, Super Micro Computer joined the S&P 500 index, usually a harbinger of positive long-term outcomes for the stock. Despite this, investors seemed to have swiftly cashed out on accumulated gains, a classic instance of β€œselling the news.”

Simultaneously, Nvidia launched its annual GPU Technology Conference (GTC). Expectations ran high on whether Nvidia or SoundHound would unveil groundbreaking technology early in the day. While Nvidia indeed introduced new GPUs at market close, the AI giant saw a post-market dip of around 1% in its share price.

Forecasting the SoundHound Symphony

Following an astounding rally, SoundHound now faces the tall task of validating its worth. Despite the recent setback, the company is currently valued at approximately 36.6 times this year’s projected sales.

SOUN PS Ratio (Forward) Chart

SOUN PS Ratio (Forward) data by YCharts

After achieving a remarkable 47% revenue growth year over year, with revenues hitting $45.9 million in 2023, SoundHound anticipates sales ranging between $63 million and $77 million in 2024. A mid-range target would represent a 53% increase in sales year over year.

SoundHound is poised for significant sales expansion, yet doubts linger on its ability to translate this into sustainable profits and robust earnings growth. With its stock on a rollercoaster ride, the investment remains a risky proposition, despite the allure of AI and robust sales growth possibly propelling share prices upward.

Is it prudent to invest $1,000 in SoundHound AI at this juncture?

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Keith Noonan holds no position in any stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool abides by a disclosure policy.

The opinions articulated here belong to the author and do not necessarily echo the sentiments of Nasdaq, Inc.

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