1 Growth Stock Down 67% to Buy Right Now

SoundHound AI (NASDAQ: SOUN) was in red-hot form toward the end of last year, hitting a 52-week high on Dec. 26, 2024, as investors capitalized on the fast-growing demand for the company's services and bought up shares of this voice-focused artificial intelligence (AI) solutions provider. SoundHound was identified as an emerging player in the conversational AI market last year, while the customers' rapid adoption of the company's offerings also added to the stock's momentum.

Since hitting that high, however, the stock price has dropped a whopping 67%. The drop can be attributed to factors such as the overall weakness in the stock market in 2025, tariff-related uncertainty, an expensive valuation, and the news that Nvidia sold its entire stake in the company.

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SoundHound's sharp decline could be cause for concern, or it could be an opportunity for savvy investors to buy a fast-growing AI company at a relatively cheaper valuation. Let's look at the reasons why buying this AI stock looks like a smart thing to do right now.

SoundHound AI delivers stunning growth that seems sustainable

SoundHound AI clocked phenomenal growth rates in recent quarters, and it's improving with each passing quarter (see chart below).

Data by YCharts.

The company is still quite small, expecting to generate $167 million in revenue this year at the midpoint of its guidance range. That will almost double its 2024 revenue, when its top line increased 84% from the prior year. The demand for SoundHound AI's voice AI solutions is increasing at a healthy pace, evidenced by the growth in the company's customer base each quarter. For instance, SoundHound AI added multiple customers in the healthcare space in the fourth quarter of 2024, expanded its presence in the automotive niche by landing new customers such as Lucid Motors, while winning more business from existing customers such as Stellantis, and also gained traction with federal customers. However, these are just some of the customers that SoundHound added during the quarter.

The company is also expanding into more markets, including financial services, insurance, and travel. It is also pushing the envelope on the product development front by offering agentic AI voice solutions. CEO Keyvan Mohajer said on the company’s February earnings call that SoundHound is seeing “exciting results in the agentic AI tools we’ve created” and that it's “building and testing agentic use cases in every major vertical.”

SoundHound plans to commercially launch its agentic AI voice solutions soon. It believes that the reach of its existing platform and presence across several verticals in multiple industries puts it in a solid position to capitalize on the impending adoption of agentic AI solutions. A third-party estimate projects that the market for voice AI agents could clock a compound annual growth rate (CAGR) of almost 35% through 2034, generating $47.5 billion in revenue at the end of the forecast period.

So, agentic AI could unlock a whole new growth opportunity for SoundHound AI. The company's diversified customer base means that it already has clients to whom it can cross-sell its upcoming voice AI agentic tools. As a result, there is a solid chance that SoundHound AI's remarkable growth could continue for a long time.

Another reason to be upbeat is the company's outstanding revenue pipeline. SoundHound ended 2024 with a cumulative subscriptions and bookings backlog of $1.2 billion. That figure is up 75% year over year. SoundHound points out that the cumulative bookings backlog refers to the balance of the committed customer contracts at the end of a period. The subscription backlog measures the "potential revenue achievable for the company with current customers where the company is the leading or exclusive provider" over a five-year period.

So, the cumulative subscriptions and bookings backlog gives investors a peek into SoundHound's revenue pipeline, and the size of this metric suggests that the company is at the beginning of a tremendous growth curve. As such, SoundHound AI's impressive growth rate seems sustainable over the long run.

The valuation is expensive but justifiable

SoundHound AI stock trades at 31 times sales, which is five times the average sales multiple of stocks in the U.S. technology sector. So, the stock remains quite expensive to buy even after its recent price pullback. But it is worth noting that its sales multiple is now a third of what it was at the end of 2024. There are AI companies, such as Palantir, which are growing at a slower pace than SoundHound but are much more expensive.

Moreover, we have seen that SoundHound is in a position to justify its valuation thanks to its massive revenue pipeline and the advent of its agentic AI solutions. So, growth-oriented investors looking to add an AI stock to their portfolios can consider accumulating SoundHound AI following its big drop this year, as the points discussed above suggest that it can become a much bigger company in the long run.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.