Why SoundHound AI Stock Sank Today

SoundHound AI (NASDAQ: SOUN) stock sank on Monday. The company's share price wound up slipping 7.5%, according to data from S&P Global Market Intelligence. The stock saw volatile trading in the daily session, having been up as much as 2.1% and down as much as 11.7%. Meanwhile, the S&P 500 index closed out today up roughly 0.8%.

While there wasn't any business-specific news pushing SoundHound stock lower today, the company's share price lost ground in conjunction with volatile swings for other high-profile artificial intelligence (AI) stocks. In particular, it appears that high expectations for Nvidia and Super Micro Computer wound up dragging the audio-tech company's share price down.

SoundHound stock is influenced by AI leaders

This year, SoundHound stock has often seen bullish and bearish price movements correspond with developments for Nvidia, Supermicro, and other closely monitored AI stocks. On balance, that's been a great thing for the audio-tech stock -- and the dynamic has helped push the company's share price up 288% across 2024's trading. But the interconnected-valuation dynamic has also been a source of volatility.

Today, Super Micro Computer stock was added to the S&P 500 index. Despite the inclusion in the benchmark index likely creating a positive long-term valuation catalyst for the server specialist's stock, it looks like the index addition wound up causing investors to "sell the news" and take profits on strong share price gains that had already been recorded.

Meanwhile, Nvidia kicked off its annual GPU Technology Conference (GTC} today. It looks like some investors may have been betting that Nvidia or SoundHound would have some big new tech to announce early in the day. While Nvidia did actually announce new GPUs around the time the market closed, the AI leader's share price has actually fallen roughly 1% in after-hours trading.

What's next for SoundHound stock?

On the heels of an incredible rally, SoundHound has a lot of proving to do. Even with today's pullback, the company is valued at approximately 36.6 times this year's expected sales.

SOUN PS Ratio (Forward) Chart

SOUN PS Ratio (Forward) data by YCharts

After growing revenue roughly 47% year over year to reach $45.9 million in 2023, SoundHound expects sales to come in between $63 million and $77 million in 2024. If the company were to hit the midpoint of that guidance range, sales would have increased roughly 53% year over year.

SoundHound looks poised to deliver rapid sales growth, but it remains to be seen if and when the company can shift into delivering reliable profits and strong earnings growth. On the heels of such explosive stock gains, the stock looks risky -- even if excitement for AI and strong sales growth could push shares higher.

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Keith Noonan 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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