SoundHound AI Stock Plummets as Nvidia Exits Stake: Implications for AI Market

SoundHound AI Plunges After Nvidia Exits Its Stake. Should Investors Follow Suit? | The Motley Fool

SoundHound stock was pulled out of obscurity when it was revealed that the semiconductor giant purchased shares in the company in the fourth quarter of 2023. The stock immediately rocketed higher on the news, but it made its biggest move late in 2024, which appears to be when Nvidia was dumping its shares. Should investors hold onto SoundHound shares, or should they follow Nvidia and exit? SoundHound operates an AI voice platform that enables voice assistants to interact with people in a more natural and conversational tone. It combines speech-to-meaning technology and deep-meaning-understanding technology to process speech in real time while recognizing a user's intent. The company generates revenue from both product royalties and subscriptions. When a customer incorporates its AI voice platform into a product, it collects royalty payments based on the volume, usage, or life of the applicable product. Meanwhile, it also sells its platform via subscription for industries where there is no product involved. Both forms of revenue tend to be largely recurring in nature. SoundHound made solid in roads in the automobile space, where it has relationships with about 20 auto brands, including Jeep, Hyundai, Kia, Fiat, Chrysler, and RAM, among others. Still, it is in only between 3% and 5% of its customers' current unit production. It sees an opportunity in the next few years to be between 40% and 45% of its current customer unit production, while gaining more customers in the space. The second big vertical the company has gotten into is the restaurant space, where it has relationships with both leading industry chains as well as restaurant-focused technology and payment companies. SoundHound has several solutions for the restaurant industry, including taking orders through drive-thrus, kiosks, and over the phone. It also has a solution that helps with employee training. More recently, the company acquired Amelia, which is known for its conversational and generative AI platform that helps with customer service, employee onboarding, and back-office tasks. Amelia helps move SoundHound into other industry verticals such as healthcare, retail, telecom, financial institutions, and insurance. The company's ultimate goal appears to be to become the premier AI-powered commerce voice ecosystem that is able to handle complex interactions across industries that all have their unique jargon. This could be something like making a doctor's appointment while taking in a patient's health insurance information and directing them to the right type of doctor. Or it could be something like helping a client make an options trade at a brokerage. SoundHound has been growing its revenue quickly, albeit from a small base. In the third quarter, it grew its revenue by 89% year over year to $25.1 million. The company is projecting 2024 revenue to be between $82 million and $85 million, growing to a range of $155 million to $170 million in 2025. SoundHound's valuation had gotten a bit out of hand when the stock shot up to well above $20 late in 2024 and it traded at a price-to-sales (P/S) multiple of over 40 times 2025 analyst estimates. With the recent pullback, the stock now trades at a somewhat more reasonable 21 times forward P/S. With revenue growth expected to about double in 2025, that's not outrageous, although where revenue growth settles in thereafter will better determine if its valuation makes sense. Meanwhile, the company's P/S multiple was lower for much of 2024. Nvidia undoubtedly made a really great return on its SoundHound investment, so it is perhaps not surprising that it sold out of its position when the stock's share price and valuation went parabolic at the end of 2024. Today the stock's valuation is a bit more reasonable, although certainly not in the bargain bin. The company has a lot of potential as it looks to become the premier AI-powered commerce voice ecosystem, but there is competition in the space and ultimately the stock is still a speculative investment at this point. As such, I would suggest any early investors to at least take some partial profits in the stock.

SoundHound AI Is Plummeting Today -- Is It Time to Buy the Stock? | The Motley Fool

SoundHound AI (SOUN -28.59%) stock is crashing Friday. The company's share price was down by 26.7% as of 11:45 a.m. ET, and had been down as much as 31.8% earlier in the trading session. The plunge was apparently driven by the news -- disclosed Friday morning in a Securities and Exchange Commission filing -- that Nvidia had sold its stake in the company in the fourth quarter of 2024. With the artificial intelligence (AI) hardware leader pulling its backing, some investors are worried about the conversational AI specialist's outlook. While Nvidia's decision to sell its stake in SoundHound AI isn't a positive signal, the move should still be put in context. Previously, Nvidia only owned roughly 1.71 million shares of the company. As of market close on Dec. 31, that stock position would have been worth roughly $34 million. Meanwhile, Nvidia currently has a market capitalization of approximately $3.36 trillion as of this writing. In other words, Nvidia's stake in SoundHound was always relatively tiny -- and never big enough to even come close to moving the needle for the graphics processing unit leader. The divestment won't have any immediate material impact on the conversational AI specialist's business, and it's possible that the market is overreacting to the news. On the other hand, Nvidia's recent stock sale does highlight some risks for SoundHound investors. For starters, the company is still valued at roughly 26.5 times this year's expected sales even after Friday morning's big sell-off. While SoundHound has been serving up fantastic sales growth and seemingly has a long runway for expansion, this dramatic stock move is precisely the type of volatility that companies with heavily forward-looking valuations often experience. Nvidia's decision to drop its stake in SoundHound AI could also signal that the company plans to devote more resources to expanding in the conversational AI space -- and that it no longer sees the smaller company as a clear technological front-runner in the category. In some ways, Nvidia's focus on agentic AI software at this year's CES show may have foreshadowed this dynamic. SoundHound AI is an early mover in a category that's still in an early stage of its long-term growth trajectory. That position comes with both benefits and risks. While the company has done an impressive job of increasing the adoption of its software, there has always been a risk that resource-rich competitors will enter the fray and use their financial, infrastructural, and relational advantages to become winners in the category. For risk-tolerant investors who see promise in SoundHound AI's long-term potential, Friday's sell-off could offer a buying opportunity (within the context of a dollar-cost-averaging plan) as the business's material outlook hasn't changed in any substantial way. On the other hand, more risk-averse investors who still want exposure to AI trends should probably seek out other plays in the space.

Nvidia Just Sold 1 of Last Year's Best-Performing Artificial Intelligence (AI) Stocks

Nvidia's (NVDA -0.12%) graphics processors (GPUs) for the data center are the gold standard when it comes to developing artificial intelligence (AI). The company has added $3 trillion to its market capitalization over the last couple of years on the back of surging demand for those chips. Nvidia started spreading some of that wealth by investing in smaller AI stocks at the end of 2023. One of them is a leading developer of conversational AI software called SoundHound AI (SOUN -3.23%), and during 2024, its stock outperformed some of the biggest names in the entire industry with a whopping 835% gain: Data by YCharts. Nvidia's latest form 13-F with the Securities and Exchange Commission was released last week, which detailed its holdings as of the end of 2024. SoundHound AI stock was notably missing, sparking a flurry of selling that saw the company lose 28% of its value in a single day on Feb. 14. We don't know why Nvidia would sell one of last year's best-performing stocks, but should investors also consider trimming their positions in SoundHound? A leader in conversational AI The most popular AI chatbots on the market today (like OpenAI's ChatGPT) were originally designed to understand text-based prompts, whereas SoundHound AI has always focused on developing voice-based applications. Its conversational AI products are now used in several commercial settings, from quick-service restaurants to the automotive industry. SoundHound's Chat AI software is now live in new cars from top manufacturers like Mercedes-Benz and Kia, where it can provide the driver with information on almost any topic on command. Plus, earlier this month, SoundHound released a new feature called Brand Personalities, which gives each manufacturer the ability to customize everything from the voice assistant's response style to its character so it stands out from the competition. SoundHound also launched the world's first in-vehicle commerce platform in January. It allows drivers to place food orders from restaurants without picking up the phone, and it even syncs with the vehicle's GPS system so it can find the most suitable locations. For example, if you're driving in an unfamiliar city, you can simply ask the assistant to order a pizza from the nearest pizzeria. Speaking of restaurants, SoundHound's software applications are now used in over 10,000 locations across some of America's most popular chains, including Chipotle Mexican Grill and Papa John's. The company offers AI-powered, automated ordering systems that can be deployed in-store, on the phone, and even in the drive-thru. It also developed a tool called Employee Assist, which can provide workers with instant information about store policies and menu items, powered entirely by voice prompts. SoundHound is currently expanding into new industries like healthcare, financial services, and insurance, thanks to its acquisition of another conversational AI specialist called Amelia in August last year. SoundHound's revenue is forecast to soar in 2025 SoundHound AI is scheduled to report its final set of quarterly financial results for 2024 on Feb. 27. The company's previous guidance suggests its revenue for the full year could come in at a record $85 million, representing an 85% increase from its 2023 result. The figure will benefit from the inclusion of Amelia's revenue during the third and fourth quarters, which provided a one-off boost. The same will be true for SoundHound's forecast for 2025 results because this will be the first full year in which it includes Amelia's financial results as part of its own. The company believes its total revenue could come in at $175 million, which will be a 105% jump from its potential 2024 result. With that said, SoundHound had an order backlog worth $1 billion at the end of the third quarter of 2024 (ended Sept. 30), which it expects to convert into revenue over the next six years. So, the Amelia acquisition isn't the company's only source of strength right now -- there is clearly significant demand for its existing product portfolio. One thing Amelia is doing is diversifying SoundHound's revenue streams. During Q3, five different industries accounted for between 5% and 25% of the company's total revenue, whereas 90% of its revenue came from the automotive industry alone in the year-ago period. SoundHound stock is extremely expensive Nvidia only owned 1.7 million shares in SoundHound, which would be worth around $19 million based on its stock price of $10.96 as of this writing. Since Nvidia is a $3.4 trillion giant, even a full and complete loss wouldn't have moved the needle, so I doubt it sold SoundHound stock because of its valuation. With that said, SoundHound stock is trading at a price-to-sales (P/S) ratio of 50 as of this writing, making it substantially more expensive than Nvidia itself: Data by YCharts. If we assume SoundHound's 2025 revenue forecast of $175 million proves to be accurate, it places the stock at a forward P/S ratio of just 23.1, which is a little less extreme. Still, it doesn't leave much room for upside unless analysts think an equally strong revenue increase might be in the cards for 2026. That seems unlikely, though, given that Amelia is making a big one-off contribution to SoundHound's revenue growth in 2025, as I highlighted earlier. That won't be replicable in 2026 because the combined companies will have to rely on organic growth alone. Even if valuation isn't the reason Nvidia sold SoundHound stock, it's not a bad reason for existing investors to potentially take some money off the table. For investors who don't own the stock, its current P/S ratio is certainly a good enough reason to stay on the sidelines. The upcoming release of SoundHound's latest financial report on Feb. 27 could offer some fresh insights into the company's vision for the future. Plus, Nvidia is scheduled to report the day before (on Feb. 26), so we might find out why it sold SoundHound.

SoundHound AI stock crashes 23% as Nvidia dumps entire stake - What it means for investors and the AI market

SoundHound AI (SOUN) stock took a major hit on February 14, 2025, plunging 23.1% to close at $11.72. The drop came after Nvidia (NVDA) disclosed it had sold its entire stake in the voice AI company. This move raised concerns about SoundHound AI's future growth and led to heavy selling pressure on the stock. The primary reason behind the sharp decline was Nvidia's complete exit from its investment in SoundHound AI. According to regulatory filings, Nvidia previously held 1.7 million shares of SoundHound AI, worth over $8 million. The sudden exit sent a negative signal to investors, leading to a major sell-off. Another factor contributing to the drop is the high volatility of AI-related stocks. SoundHound AI had gained significant attention in recent months due to its role in AI-powered voice recognition technology. However, Nvidia's decision to sell its stake suggests it may be reallocating its investments toward other AI opportunities. Also Read : Gold Rates Today: Gold prices hit record peak as weaker dollar, falling yields, and speculative buying fuel surge - Why are Gold prices rising, and Is the rise temporary? Nvidia's latest financial filings show that the company not only exited SoundHound AI but also reduced its stake in Arm Holdings PLC by 44%. Additionally, it sold shares in Serve Robotics and Nano-X Imaging Ltd while making new investments in WeRide Inc. (a Chinese self-driving technology company) and Nebius Group N.V. (an AI cloud computing firm). This shift indicates that Nvidia is diversifying its AI portfolio, possibly focusing more on AI infrastructure and cloud computing rather than voice recognition technology. Despite the recent stock drop, analysts remain divided on SoundHound AI's long-term potential. According to Wedbush analyst Daniel Ives, SoundHound AI is still a "long-term winner in the AI revolution", with revenue expected to reach $84 million in 2024. However, Nvidia's exit raises questions about whether SoundHound AI can sustain its growth without support from a major AI player like Nvidia. The AI sector has seen significant volatility in 2024, with stocks experiencing rapid ups and downs. While SoundHound AI has strong revenue growth prospects, the loss of Nvidia as a key investor may lead to short-term uncertainty. Also Read : Where is my Tax Refund? A step-by-step guide to tracking, avoiding delays, and getting your money faster! For now, investors will be closely watching SoundHound AI's upcoming earnings report and whether the company can continue its growth in the AI space without Nvidia's backing. Why did SoundHound AI stock drop? Nvidia sold its entire stake, leading to a market sell-off. What was Nvidia's stake in SoundHound AI? Nvidia owned 1.7 million shares worth over $8 million.

SoundHound AI Stock Drops 27% As Nvidia Exits Position - SoundHound AI (NASDAQ:SOUN)

Shares of SoundHound AI, Inc. SOUN are experiencing a sharp decline Friday following Nvidia's disclosure in a 13F filing that it has completely dissolved its stake in the company. What To Know: Nvidia's 13F report, filed with the SEC for the quarter ending Dec. 31 2024, showed the company no longer holds any shares of SoundHound AI. Nvidia's remaining positions include Applied Digital Corp, ARM Holdings, Nebius Group, Recursion Pharmaceuticals and and WeRide Inc. Nvidia's exit could raise questions about SoundHound AI's future growth and stability. As a major player in the AI space, Nvidia's backing likely provided credibility and confidence for other investors. This move highlights the volatility of AI stocks, where shifts in institutional investments can drive drastic price swings. SOUN Price Action: SoundHound shares were down 29.3% at $10.79 at the time of writing, according to Benzinga Pro. Read Next: 'Bad Trump To Good Trump' Means Bitcoin Could Go To $102,500, Standard Chartered Says Image Via Shutterstock. SOUNSoundHound AI Inc$10.68-30.0%WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

Should Investors Buy SoundHound AI Stock Before Feb. 27?

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Why SoundHound AI, Serve Robotics, and Nano-X Imaging Are Getting Crushed Today (Hint: It Has to Do With Nvidia) | The Motley Fool

Shares of several artificial intelligence (AI) stocks in various sectors are getting crushed this morning after the AI chip king Nvidia revealed in documents filed with the Securities and Exchange Commission (SEC) that it exited its position in these companies. Shares of SoundHound AI (SOUN -27.84%) had fallen roughly 25% as of 10:40 a.m. ET today. Shares of Serve Robotics (SERV -39.92%) declined a whopping 38%, while shares of Nano-X Imaging (NNOX -10.86%) were down nearly 13%. Publicly traded companies are allowed to invest in other publicly traded companies, a practice Nvidia has undertaken since last year. Nvidia naturally invested in other AI stocks. While it's impossible to know the exact reason Nvidia invested, it looks like Nvidia took an interest in many companies it believed could ultimately assist its business through some kind of partnership or perhaps grow the broader AI market. In its recent 13-F filing with the SEC, which shows which stocks Nvidia owned at the end of each quarter, Nvidia no longer listed SoundHound AI, Serve Robotics, and Nano-X Imaging. At the end of the third quarter, Nvidia held a nearly $30 million stake in Serve Robotics, an $8 million stake in SoundHound AI, and a $362,000 stake in Nano-X Imaging. Serve Robotics builds zero-emission robots currently used for food delivery, although the company plans to build these robots for further uses in the future. SoundHound AI builds AI-powered voice solutions that can interact with people and are highly useful for customer service. Nano-X Imaging is leveraging AI to help identify asymptomatic conditions associated with cardiac, liver, and bone diseases. Nvidia has formed partnerships with SoundHound AI and Serve Robotics that are still in place, as far as the public knows. Management at Nvidia previously said it is working with SoundHound to develop generative AI and accelerated compute solutions for automobiles. Serve uses hardware and software built by Nvidia to power its robots. Neither of these companies have yet to turn a profit, so while they are working on some incredible innovations, they are going to be volatile. Even so, SoundHound AI is the only one of these three that has really benefited from the AI trade, with its stock up 420% over the last year. While analyst coverage is limited, the few analysts that do cover each stock are bullish on these names and think there is significant upside potential. While Nvidia is arguably the most respected AI company in the world, I wouldn't read too much into these sales as a reflection of these three companies. Ultimately, it's not clear exactly why Nvidia sold these stocks. It may have needed the capital for something else. SoundHound AI, Serve Robotics, and Nano-X Imaging are all impressive companies but they have yet to make a profit, meaning you are effectively investing in late-stage start-ups, which can be risky and will likely lead to volatility. That's why I would keep positions small for now until there is more clarity on their growth and financial trajectories.