SoundHound AI (SOUN -2.74%) was one of the best-performing stocks in 2024, rising 836%. At its peak, the stock was up a jaw-dropping 1,040% -- but that was last year. Since peaking in December, SoundHound AI has sold off incredibly quickly and now sits around 60% off its all-time high. T

That's a tough pill to swallow for anyone who bought at the top, but is this a buying opportunity for those who missed the initial run-up?

SoundHound AI is a global company

SoundHound AI is clearly an artificial intelligence company, but what sets it apart from other AI investments? SoundHound AI is focused on audio inputs for AI models rather than text inputs. Think of all the situations in which speaking is needed rather than being able to type on a keyboard, and it becomes quite clear that there is a huge opportunity for SoundHound AI's software to be implemented.

SoundHound's biggest industries right now are restaurants and automotive, as its software is being widely used to automate drive-thru experiences and as a digital assistant in cars. While some domestic restaurants have deployed SoundHound's software (like Jersey Mike's and White Castle), it hasn't made its way into digital assistants in the U.S. However, with some foreign automakers (like Stellantis) already implementing it overseas, it's only a matter of time before that capability is integrated into U.S. vehicles.

SoundHound's growth case is extremely wide, and it's growing like a weed. In Q4, revenue rose 101% year over year to $34.5 million. For the full year, its revenue was up 85% to $84.7 million, and that growth is expected to accelerate in 2025. For 2025, management expects revenue between $157 million and $177 million, indicating that revenue is projected to nearly double. With that much strength ahead, SoundHound doesn't seem like a stock that should be down 60% from its highs, so is this a golden buying opportunity?

SoundHound's stock price in years of strong growth

SoundHound's stock crashed back to Earth because of inflated expectations. At its peak, it traded for more than 100 times sales, which is a difficult valuation to justify. Now, it's down to 41 times sales, which is still quite expensive. A more typical software company valuation is between 10 and 20 times sales, but then again, most software companies don't double their revenue year over year.

SOUN PS Ratio data by YCharts

If SoundHound doubles its revenue in 2025, it will return to that 20-ish times sales range, placing it on the higher average spectrum of software company valuations. But if SoundHound can provide another year of monster growth in 2026, then today's price starts to look more attractive.

While SoundHound doesn't offer revenue guidance two years out, it does provide investors with another important metric: bookings backlog. This gives investors a measure of how much value remains on the contracts it has signed, which isn't a perfect metric. These contracts can be terminated at any time, so they aren't guaranteed revenue. However, they are a good guiding light for understanding where the company is.

After Q4, SoundHound AI's bookings backlog was $1.2 billion, up 75% year over year. Considering that SoundHound is expected to convert about $167 million of that backlog into revenue during 2025, that means over $1 billion will be recognized over the next "several" years, according to management.

That's huge potential growth, not to mention all the new customers that will be acquired throughout 2025 and 2026. I think SoundHound AI stock could be bought here if you believe that the growth will stay rapid past 2025. If it doesn't, the stock could get sold off even further. But if it continues to grow like it is, SoundHound AI stock could provide investors with fantastic returns.