Shares of SoundHound AI (SOUN -4.27%) fell 25% in March 2025, according to data from S&P Global Market Intelligence. The maker of artificial intelligence (AI) tools for computer interpretation of voice commands didn't have an earnings release last month. The company's only business-related press release featured another collaboration with AI giant Nvidia, which tends to drive SoundHound AI's stock higher. So why did the share price continue to fall after negative moves in January and February? It simply looks like the meme-stock moves of last December are fading out a bit slower than they arrived.

SoundHound AI is walking back from some lofty heights

SoundHound AI's shares started March's market action at $10.82 per share. That was down from $14.15 one month earlier, $19.84 at the end of 2024, and $23.23 per share at the mid-holiday peak.

There was a lot of social media-powered hot air to release from SoundHound AI's inflated stock price, and it's taking a while. The stock doesn't even look cheap after three months of robust price drops, when you consider that it traded for $4.50 per share in early October. Some would even call that single-digit price a bit inflated, given SoundHound AI's volatile market action in the spring of 2024. As a reminder, Nvidia invested just $3.7 million in SoundHound AI stock and the share price more than quadrupled over the next month.

There's real business potential under all the market noise

Now, there is real substance to SoundHound AI's business. The company's AI-driven voice recognition platform is a prime-quality system, finding use cases and deep-pocketed clients in areas such as in-car system controls, drive-thru ordering windows, and phone-based menu systems. The company addresses a large and growing market from a surprisingly strong leadership position.

However, it's a bit early to lift the stock price into the stratosphere. SoundHound AI will take years to convert its robust order backlog into bankable revenue (not to mention profits, which could take even longer). For now, the stock is changing hands at a lofty 39 times trailing sales. A lot has to go absolutely right in order to justify even this lowered price point.

All that being said, I rebuilt my SoundHound AI position in mid-March after taking some profits in December. That's how confident I am in the company's ability to monetize its long-term contracts and continue to grow its client roster. But it's a pretty small position, and I would not recommend betting big money on this fairly risky idea right now. It could drop back to $2 or $3 per share and still look pricey in a certain slant of light.