SoundHound AI Sank Despite Initially Posting Gains Today -- Is the Stock a Buy?

SoundHound AI (NASDAQ: SOUN) stock saw wild trading Monday and ended the day down 4.6% despite having been up as much as 7.8%. Meanwhile, the S&P 500 index slipped 1.8% in the session, and the Nasdaq Composite index fell 2.7%.

SoundHound AI wound up posting a significant sell-off today due to risks for artificial intelligence (AI) company valuations and broader macroeconomic concerns. Reports emerged recently confirming that China was skirting U.S. export bans and still gaining access to Nvidia's most advanced AI processors by buying them from third-party sellers. Sell-offs intensified after President Trump confirmed that new tariffs on Canada and Mexico would go into effect tomorrow.

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Is SoundHound AI stock a buy now?

There shouldn't be any doubts about it -- SoundHound is a high-risk stock. It's got some strong, early positioning in the conversational AI market, but the space is still young and likely to become home to a growing number of resource-rich competitors. Along those lines, Amazon has been showing off its next-gen conversational Alexa service and generating positive buzz.

SoundHound AI also trades at a growth-dependent valuation even after its sell-offs this year. The company is priced at approximately 24.6 times this year's expected sales and isn't expected to be profitable in 2025.

On the other hand, the continued valuation pullback comes on the heels of a pretty encouraging fourth-quarter report last week. Sales for the period beat expectations, and the company raised its sales target for this year to be between $157 million and $177 million -- an improvement of $2 million on both the high and low ends of the range. SoundHound AI is still a very risky stock and will continue to see high volatility in the near term, but it looks like a better buy now that it's beaten Q4 expectations and continues to see its share price fall.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.