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Artificial intelligence (AI) stocks have taken a hit this year, shedding some of the impressive gains they racked up in 2024. Even industry giant Nvidia (NVDA), which is considered the face of AI, has not been spared, as concerns over trade policies and fears of a slowdown in AI infrastructure spending weigh on investor sentiment.
However, this pullback presents an opportunity. When strong companies see their stock prices decline due to broader market pressures rather than fundamental weaknesses, it can create an attractive entry point. One such company that stands out is SoundHound (SOUN), which has seen its stock drop nearly 50% in the year to date.
Several factors have contributed to SoundHound’s decline, including macroeconomic uncertainties. Moreover, valuation concerns and Nvidia’s decision to exit its position in the stock dragged it lower. Despite this downturn, SoundHound’s underlying business remains solid, and the company is well-positioned for growth in 2025 and beyond led by the growing demand for voice AI technology across multiple industries.
Let’s look at the factors that could lead to a strong recovery in SoundHound stock, making it a solid investment near the current market price.
SoundHound: A High-Growth AI Play with Strong Momentum
SoundHound is firing on all cylinders, delivering record growth as it expands its presence across multiple sectors. It posted $34.5 million in revenue, up 101.5% year-over-year in the fourth quarter of 2024. This marked its strongest quarterly performance to date, reflecting solid demand for its offerings.
The automotive industry continues to drive growth for SoundHound, thanks to considerable expansion in its generative AI solutions. The company also experienced robust year-over-year growth in active cloud users, which shows customer engagement and long-term retention. Moreover, SoundHound’s presence in customer service is also scaling rapidly, with new clients coming on board. While growing organically, the company is also benefitting from its recent acquisitions.
SoundHound’s full-year performance was equally impressive. It generated $84.7 million in revenue, reflecting an 85% increase compared to the previous year. Moreover, SoundHound’s top line has grown at a compound annual growth rate (CAGR) of over 50% in the last five years.
Highlighting the solid demand, SoundHound’s management said that since going public in 2022, the company’s top line had grown eight times, and bookings jumped five times. These metrics reflect SoundHound’s ability to scale rapidly, making it a high-growth investment opportunity.
Looking ahead, SoundHound is well-positioned to sustain its momentum. SoundHound has laid the foundation for long-term growth by expanding its portfolio and diversifying across multiple industries. Its customer base has broadened to include new automotive partners, healthcare clients, and a recent seven-figure deal with a major energy corporation, increasing its market penetration across diverse verticals.
Strengthening Financial Stability and Reducing Risk
SoundHound has also reduced its customer concentration risk, enhancing revenue stability. Previously, five key clients accounted for over 90% of its revenue. Today, that figure has declined to one-third, significantly reducing dependence on a handful of customers. Additionally, the company’s largest customer contributed just over 14% of total revenue in 2024, a notable improvement from nearly 50% in 2023.
SoundHound’s financial health remains solid, with a strong balance sheet and increasing contractual commitments. At the end of 2024, the company reported a cumulative subscription and bookings backlog of nearly $1.2 billion, reflecting a 75% year-over-year increase. This backlog indicates robust customer commitments and provides visibility into future revenue growth.
Furthermore, the company is securing new contracts and capitalizing on cross-selling and up-selling opportunities within its expanding product portfolio. With a growing addressable market and a robust pipeline, SoundHound is well-positioned to sustain its upward trajectory.
The Bottom Line: SoundHound Is a Solid Long-Term Bet
Overall, strong customer demand, expansion into new verticals, increased penetration in existing markets, and diverse product portfolio position it well to deliver solid growth.
Wall Street analysts currently maintain a “Moderate Buy” consensus rating. However, given its exceptional growth trajectory, the recent stock correction presents a buying opportunity.
