While the stock market has risen out of correction territory, plenty of stocks are much lower than just a few months ago. One of those is SoundHound AI (NASDAQ: SOUN), which is still down around 60% from its December highs.
With the stock that low, many investors might wonder if this is a prime buying opportunity. If the stock returned to its all-time high, it could provide massive returns.
While SoundHound AI has been in the public market for a few years, it came into the spotlight when it was revealed that Nvidia owned shares of the stock. This caused the stock price to increase, as they wanted to own shares in a company that an AI leader thought was worth investing in.
Fast-forward to today, and Nvidia no longer owns shares, which caused many investors to speculate about their reason for investing in it in the first place. It likely had to do with Nvidia and SoundHound AI’s partnership on a project where the two collaborated to create a GPU meant for vehicles that allows users to access generative AI while driving.
Just because Nvidia sold SoundHound shares doesn’t mean it no longer believes in the company. After all, Nvidia only owned $3.7 million worth of shares during its original filing. As of the last quarter, Nvidia’s cash and short-term investment balance was $43 billion. So it obviously didn’t need the money. But SoundHound AI did.
SoundHound AI is still working its way toward profitability, and it has had to raise capital multiple times. It’s possible that Nvidia was part of this, which is why it owned shares. Now, SoundHound AI is in much better financial shape, and management expects to achieve adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profitability by the end of 2025. While this isn’t true profitability, it is one milestone along the way to creating a fully profitable business.
But is this still a stock worth investing in after Nvidia dumped its shares?
SoundHound AI is expected to grow massively in 2025 after a phenomenal 2024. It ended the year with Q4 revenue growth of 101%. 2025 is expected to be nearly on par with those latest results, with management guiding between $157 million and $177 million in revenue for the full year. That indicates a growth rate of 97%, so investors can expect revenue to almost double.
Clearly, SoundHound isn’t a struggling company, as its AI audio recognition platform is starting to pick up steam in multiple sectors. However, another part of its downfall was its sky-high valuation, as the stock traded for more than 100 times sales at its peak.
