Shouldn't Investors Consider Purchasing Soundhound AI Shares After Its Nvidia-Prompted Selling Spree?
Soundhound AI's (SOUN -5.50%) shares saw an astronomical surge of up to 883% last year, only to plummet by approximately 55% from its peak in late December. Fears of fewer interest rate cuts than anticipated in 2025 by the Federal Reserve and the potential impact on high-flying growth stocks like Soundhound AI contributed to its decline. However, a significant contributing factor to Soundhound AI's recent 30% dip was the actions of another tech giant - Nvidia (NVDA -4.05%).
The Nvidia Factor
Investors generally view major company investments as a positive sign of confidence in a smaller company. Nvidia initially backed Soundhound AI with a whopping $75 million investment in 2017. The significant disclosure of Nvidia's stake in Soundhound in a regulatory filing in February 2024 ignited a positive response from investors, propelling Soundhound AI's stock higher.
However, the same hand that gave could eventually take away. Last week, Nvidia revealed that it had completely divested its stake in Soundhound AI. While Nvidia might have several reasons for selling its stake, the market perception was primarily negative. The sale was seen as a vote of no confidence by some investors, casting a shadow over Soundhound AI's stock.
Soundhound AI's Strong Fundamentals Remain
Regardless of the news surrounding Nvidia's sale, Soundhound AI's prospects continue to look promising. The company reported its highest-ever quarterly revenue of $28.8 million in Q3 2024, marking an impressive 89% year-over-year growth. The diversification of its customer base also improved, with its largest customer contributing just 12% of total revenue.
The potential of voice AI technology is vast, with an estimated total addressable market of at least $140 billion. With automotive and restaurant customers already on board, Soundhound AI is merely scratching the surface of its opportunities in these sectors.
Is Soundhound AI Stock a Buy?
While Nvidia's exit from Soundhound AI may cause some concerns, the company's impressive growth and potential to further monetize voice AI technology make it an intriguing investment opportunity for aggressive investors.
However, the stock's volatility should not be underestimated, given its high risk and potential for substantial returns. Soundhound AI continues to face intense competition, and its valuation may appear steep to some, trading at nearly 50 times sales.
Ultimately, the decision to invest in Soundhound AI comes down to individual risk tolerance and investment strategy. It's essential to conduct thorough research before making an investment decision.
- Despite Nvidia's divestment, Soundhound AI's finance sector performance remains strong, as evidenced by its highest-ever quarterly revenue of $28.8 million in Q3 2024, representing an 89% year-over-year growth.
- As Soundhound AI continues to invest in voice AI technology, with an estimated total addressable market of at least $140 billion, investing in its stocks could be an attractive option for those keen on 'investing' in high-growth companies like Nvidia ('nvidia') once backed it.
- In light of Nvidia's decision to sell its stake in Soundhound AI, some investors might be hesitant to invest in 'stocks', considering the 2025 Federal Reserve's interest rate cut predictions and the impact on similar 'growth stocks' like Soundhound AI.
- Soundhound AI's financial future looks promising, as the company has managed to diversify its customer base and secured significant partnerships in the automotive and restaurant sectors, which could 'skyrocket' its revenue growth in the coming years, similar to how Nvidia's ('NVDA') initial investment caused Soundhound AI's stock to surge in 2017.
