SoundHound AI Inc (SOUN) saw its shares plunge over 5% in pre-market trading on Monday, as investors reassessed the company's lofty valuation and competitive position in the voice AI market.
The primary concern surrounding SoundHound AI is its sky-high valuation, with the stock trading at a price-to-sales ratio of around 70 despite having no free cash flow or profitability. This valuation appears to be driven by speculative sentiment around the artificial intelligence (AI) sector rather than fundamentals.
While SoundHound AI possesses unique voice AI technology and has secured partnerships with various companies, the company faces fierce competition from tech giants like Amazon, Google, and Apple, who dominate significant portions of the voice AI market. Moreover, SoundHound AI's high rate of share dilution, with diluted shares outstanding increasing by a staggering 126.8% compound annual growth rate since 2019, raises concerns about shareholder dilution.
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