Why SoundHound AI Stock Is Plummeting Today

SoundHound AI (NASDAQ: SOUN) stock is seeing big sell-offs in Tuesday's trading. The conversational artificial intelligence (AI) company's share price was down 8% as of 11:45 a.m. ET and had been down as much as 11% earlier in the session. Meanwhile, the S&P 500 index was down 0.5%, and the Nasdaq Composite index was down 1.2%.

SoundHound AI is losing ground today in conjunction with an uptick in selling pressures for the broader market. In addition to the bearish trading backdrop, the company's stock is seeing sell-offs due to elevated investor expectations about potential news from the Consumer Electronics Show (CES) trade show.

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SoundHound AI stock is slipping at the start of the CES

Nvidia CEO Jensen Huang kicked off this year's CES trade show with a keynote address last night, and some SoundHound AI investors were hoping the tech leader would mention the conversational AI specialist in his speech. Nvidia has an investment in SoundHound, and even seemingly unrelated news for the AI leader is sometimes enough to power substantial moves for the smaller company's stock. Unfortunately, Huang's keynote address came and went without a mention of SoundHound.

The conversational AI specialist did unveil its first in-vehicle voice commerce platform today, but it looks like investors were hoping for more groundbreaking news. The upcoming platform will allow users to order from restaurants directly through their vehicle's infotainment system. SoundHound is demoing the platform at its CES booth and will be presenting at the show through Jan. 10.

What comes next for SoundHound AI?

As today's trading indicates, SoundHound AI stock is predisposed to volatile moves. With a market cap of roughly $6.8 billion, the company is valued at roughly 41 times this year's expected sales. That's a highly growth-dependent valuation that sets the stage for downside pressures if positive catalysts fail to arrive or fall short of expectations or the broader market turns bearish.

On the other hand, the pullback for the stock at the start of this year's CES show probably doesn't say much about the company's long-term future. The business has been adding customers and growing sales at an encouraging clip, and it's built a highly scalable platform with a wide variety of use cases that have yet to be tapped.

With its last quarterly update, management raised its midpoint sales growth target for 2024 to 82%. Even better, the company expects its sales growth to accelerate to more than double in 2025. So, while SoundHound AI stock remains a high-risk, high-reward play, the business has been serving up impressive growth and has some big opportunities ahead.

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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.