Is SoundHound AI Stock a Buy Now?

SoundHound AI (NASDAQ: SOUN) is having a terrible 2025 so far as shares of the voice artificial intelligence (AI) solutions provider have dropped more than 57% as of February 25, and the stock received its latest jolt after it emerged that semiconductor bellwether Nvidia has sold its stake in the company.

It is worth noting that SoundHound sprung into the limelight in February 2024 after it emerged that Nvidia had a small stake in the company worth $3.7 million. Since then, shares of SoundHound have witnessed a roller-coaster ride on the market, rising remarkably in the fourth quarter of 2024. So, the news that Nvidia has sold its SoundHound stake for a nice profit led many investors to press the panic button.

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However, is the latest drop an opportunity to buy this fast-growing AI company? Let's find out.

Nvidia's sale of its SoundHound position isn't a big deal

SoundHound's market cap currently stands at just over $4 billion. So, Nvidia's stake in the company wasn't so big that it warranted a sharp sell-off. Of course, some may wonder if Nvidia's exit suggests that it wasn't expecting more upside from SoundHound, especially considering its valuation. That may be true to an extent as SoundHound has been trading at expensive levels in the past year thanks to the big jump in its stock price.

What's worth noting is that SoundHound is still trading at an expensive 47 times sales following its sharp pullback in 2025. However, that's lower than the stock's price-to-sales ratio of 90 at the end of 2024. So, investors are getting their hands on this growth stock at a relatively cheaper valuation right now. More importantly, the pace at which SoundHound has been growing could help it justify its expensive valuation.

Does this mean growth-oriented investors looking to add an AI stock to their portfolios should consider buying SoundHound right now?

The company's terrific growth is set to continue

SoundHound will release its fourth-quarter 2024 results on Feb. 27. The company's guidance for 2025 indicates that its top line is on track to increase 82% from the previous year. That would be a sharp improvement over the 47% revenue growth the company clocked in 2023.

Even better, the midpoint of SoundHound's 2025 revenue guidance stands at $165 million, which would be nearly double its 2024 revenue. Analysts are expecting a slowdown in the company's growth rate in 2026, as shown in the chart below.

SOUN Revenue Estimates for Current Fiscal Year data by YCharts

However, SoundHound may very well outpace Wall Street's growth expectations next year. That's because the company points out that it has a combined order backlog of more than $1 billion after taking into account its recent acquisition of enterprise AI software provider Amelia. That's much higher than the combined revenue that the company is on track to achieve in 2024 and 2025, and also exceeds the revenue that analysts are expecting it to report next year.

Moreover, SoundHound AI's voice AI solutions are gaining healthy traction in the market. It has built a solid customer base in the automotive and restaurant verticals. Also, the company is looking to push the envelope by bringing more customers on board and diversifying into new areas following its Amelia acquisition.

A closer look at recent press releases suggests that the adoption of SoundHound's offerings remains healthy, with the likes of Lucid Motors and Kia integrating its solutions in their vehicles. Moreover, SoundHound is operating in a multibillion-dollar voice AI market that's expected to jump nearly 20x in size between 2024 and 2034, generating close to $48 billion in annual revenue after a decade.

So, investors who are willing to pay a premium for the outstanding growth that SoundHound is delivering could be rewarded with robust upside in the long run, making the recent pullback an opportunity to buy it before a potentially solid earnings report sends it higher.

However, they need to keep in mind that SoundHound stock has been prone to volatility in the past year, and its expensive valuation leaves open the possibility of big swings in the stock price.

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Harsh Chauhan 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.