SoundHound AI Stock at a Crossroads—Is a Bottom in Sight?

Key Points

• SoundHound investors should expect volatility in 2025 with a high likelihood that the stock price will retest all-time high levels. 
• NVIDIA's sale of SoundHound stock raises questions but does little to alter the company's growth outlook. 
• Analysts' price targets cover a wide range, but sentiment is firming and guiding this market to higher levels. 

SoundHound NASDAQ: SOUN stock may not have found its February bottom yet, but the odds are high that the market will hit it soon and begin to rebound. That is because of the company’s improving business quality, hypergrowth, valuation, and analysts' sentiment.

However, the odds of a new all-time high are slim given the threat of dilution, so investors should expect volatility in 2025 with some fairly large swings between the peaks. The likely floor of the market is near $9.15, if not higher, and the potential ceiling is at an all-time high, and both may be retested before the end of 2025. Here’s why. 

NVIDIA Raises Doubts About SoundHound’s Future

NVIDIA shocked the SoundHound market when it revealed no stake in its latest filing. The news means the liquidation of 1.7 million shares, equal to roughly $8 million at the time of the sale. The fact that NVIDIA sold 100% of its position is alarming because it shows a lack of confidence, but there are mitigating factors. 

The primary reason is that NVIDIA’s SoundHound investment has more than doubled within twelve months, providing an attractive exit for the business. The second is that NVIDIA’s SoundHound exit was followed up by entry into other AI plays that align better with its core offerings. The takeaway from this data could be that NVIDIA lost faith in SoundHound, but the more likely scenario is opportunistic profit-taking and repositioning. SoundHound’s business is still in fine shape, growing and creating shareholder value. 

SoundHound Enters Hypergrowth Phase 

SoundHound’s business started gaining traction in 2024 with expanding verticals and increasing client count. The company’s Q3 results included revenue growth accelerating sequentially and year-over-year to 90% and improved guidance. The guidance is for another acceleration to 96% in Q4, and the forecasts for 2025 are comparable. 

Analysts project over 100% revenue growth in 2025, though this estimate may be conservative given rising client adoption and market penetration. The company also maintains a strong foothold in the automotive industry. Still, it has made significant headway with restaurants, financial services, healthcare, and insurance, which account for at least 5% of quarterly revenue each and are top-listed sectors that benefit from AI automation.  

Among the tailwinds for its business is growing brand recognition. SoundHound is now the AI voice of choice for restaurants ranging from Chipotle Mexican Grill to Jersey Mike’s, White Castle, and Panda Express. This creates an environment where businesses and consumers can come into contact with its services regularly, potentially increasing demand and adoption. 

Analysts Sentiment Firms Despite Risk of Dilution

The analysts' sentiment trends are firm but align with an outlook for volatility because of the wide range of price targets. The trends include increasing coverage and a rising consensus with the potential for a triple-digit upside at the high end but only a single-digit gain at the consensus. Wedbush and H.C. Wainright set the high-end targets following the Q3 release but were not matched by subsequent analyst revisions. Those align with the consensus and assume fair value near mid-February price points. 

The risk of dilution is real. The company has been using dilution to keep the balance sheet in good condition, and it is, the problem is that the share count increased by 50% over the last year and will likely increase again. The latest news includes a mixed-shelf offering worth $500 million or roughly 12% of the mid-February market cap. So, the price action shows signs of support at the 150-day EMA but is still above critical support targets near $9.15. A rebound could begin soon, but a move to $9.15 could happen first.