Why SoundHound AI Stock Is Getting Crushed This Week

SoundHound AI (NASDAQ: SOUN) stock is seeing dramatic sell-offs in this week's trading. The company's share price is down 27.2% from last Friday's market close, according to data from S&P Global Market Intelligence.

The U.S. stock market is closed today in remembrance of President Jimmy Carter, but SoundHound AI stock has seen a big valuation pullback across this week's first three days of trading. The conversational artificial intelligence (AI) specialist's share price has suffered a big pullback in conjunction with macroeconomic risk factors and concerns about rising competition.

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Macroeconomic risks send SoundHound AI stock tumbling

On Tuesday, the Bureau of Labor Statistics (BLS) published its Job Openings and Labor Turnover Survey (JOLTS) data for November. The JOLTS survey showed that there were 8.1 million new job openings in the month, which came in ahead of the 7.7 million openings forecast by economists. Job openings had been expected to decline slightly from the 7.8 million figure reported by the survey for October, and the unexpected increase triggered concerns that economic activity is still coming in hotter than expected.

While more job openings can be considered a good thing in many respects, the report raised concerns about inflation. Additionally, U.S. Treasury bond yields have been rising. With inflationary concerns increasing somewhat and bond yields on the rise, the macroeconomic backdrop turned bearish for SoundHound AI and other growth stocks this week.

Investors got another piece of bearish news on Wednesday with reports that President-elect Trump is considering declaring a national emergency in order to quickly roll out his desired tariff policy once he takes office. While expanded tariffs under the new Trump administration were already expected, the report triggered concerns that they could be larger and more expansive than previously anticipated.

Competitive concerns are also pressuring SoundHound AI stock

SoundHound AI stock has been on an incredible run. Even with a big pullback this week, the company's share price is up 615% over the last year. But concerns about the company's competitive positioning appear to be on the rise.

SoundHound has emerged as an early leader in the conversational AI space, but this week's CES trade show has spotlighted new artificial intelligence offerings from Nvidia and other tech players. Trading at roughly 34 times this year's expected earnings, SoundHound AI has a highly growth-dependent valuation -- and its stock could face significant pressures if new players move in on its turf and curb its expansion opportunities. While it's not clear if the business will wind up be being disrupted, investors should be keeping a close eye on competitive developments in the space.

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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.