Financial Experts Show Optimism Towards this Artificial Intelligence (AI) Company's Shares. However, I Remain Skeptical.
SoundHound AI, the voice recognition software company with a ticker symbol SOUN, has seen its share of ups and downs in the tech industry. Despite winning contracts from big names like Qualcomm, Stellantis, and Netflix, the company continues to struggle financially.
Investors and analysts remain optimistic, with five out of seven rating SoundHound AI a strong buy or a buy in June 2024. This optimism stems from the company's partnership with Nvidia, which will power SoundHound's voice recognition product using Nvidia Drive, a platform designed for autonomous vehicles.
The partnership with Nvidia drove a spike in SoundHound AI's stock price, reaching an intraday high of $8.91 per share in March 2024, its highest point in nearly two years. However, even this investment wasn't enough to sustain the stock price growth, and by early April, SoundHound AI had fallen to nearly $3.50 per share.
SoundHound AI's financial struggles are evident, despite its growing customer and partner base. In the first quarter of 2024, revenue of $12 million saw a dramatic increase of 73% annually. Unfortunately, the company's operating expenses for the same period amounted to just over $40 million, almost 3.5 times higher than its revenue. After adding in $4 million of additional expenses, its Q1 net loss was $33 million.
To raise enough cash to keep the company afloat, SoundHound AI has had to significantly dilute its shareholders. In just 15 months, the number of outstanding shares has increased by 66%, significantly devaluing the holdings of its investors.
What's more, these diluted shares appear significantly overvalued. As a money-losing company, SoundHound AI does not have a P/E ratio. Even with its movements, it still sells at a high price-to-sales (P/S) ratio of 35 times sales (as of 2024) and 109 times sales (as of 2025 projections). Investing in such a high-risk stock may not be advisable, given the company's financial challenges and fierce competition from tech giants like Apple, Alphabet, and Amazon.
In conclusion, SoundHound AI's promising partnerships and impressive revenue growth may appeal to some investors. However, its high valuation, operating losses, and financial vulnerabilities make it a risky investment. Potential investors should carefully weigh the risks and rewards before deciding to invest in SoundHound AI.
Investors might be hesitant to pour more money into SoundHound AI, considering its history of financial instability and high valuation. Despite the promising partnerships and revenue growth, the company's operating losses and burdensome price-to-sales ratio make it a potential risk in the finance world.
To keep the company afloat, SoundHound AI has diluted its shareholders extensively, which may leave some investors questioning the value of their holdings in the finance sector.
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