Shares of SoundHound AI Inc (NASDAQ: SOUN) surged 5.06% on Tuesday, February 18, 2025, despite Nvidia Corp. disclosing that it had sold off its entire stake in the conversational AI company during the fourth quarter of 2024. Nvidia's exit from its 1.73M share position in SoundHound AI has led to significant downward pressure on the stock, which plummeted 28% on Friday following the news.

Despite the stock's volatility, SoundHound AI is expected to report strong earnings for its fourth fiscal quarter, with analysts projecting a 96% year-over-year increase in revenue to $33.7 million. The company has been successful in scaling its operations and signing on new customers for its core AI products in non-automotive sectors, driving its top-line growth.

However, concerns remain about SoundHound AI's excessive valuation, even after the recent decline. The company is currently trading at a price-to-revenue ratio of 21.4X, significantly higher than industry peers. Analysts have raised questions about SoundHound AI's ability to maintain its rapid pace of top-line growth while improving its profitability profile, as the market for AI-driven voice automation becomes increasingly competitive.

While SoundHound AI's upcoming Q4 earnings report may provide a temporary boost, the company's long-term prospects hinge on its ability to address investor concerns over its high revenue multiplier and potential for continued investor exodus following Nvidia's stake sale. As the AI landscape evolves, SoundHound AI will need to prove its staying power and justify its lofty valuation.