Summary

• SoundHound AI stock collapsed into a deep bear market as the bubble I warned about imploded. Is the crash finally over?

• SoundHound AI aims to achieve adjusted EBITDA profitability over the next year and boasts a relatively solid balance sheet.

• The company's proprietary technology and growth in voice AI across various sectors represent a secular long-term opportunity.

• While SOUN's valuation isn't cheap and is still unprofitable, we should focus on its ability to scale and validate its business model.

• I argue why the time for investors to consider loading up has finally arrived, as the dust settles for SOUN.

Just like that, the stock of SoundHound AI fell more than 40% since my previous SOUN update as investors cashed out from the unprofitable AI stock. And the fact that SOUN is mainly dominated by retail investors in its holdings isn't doing much favors as compared to companies with a higher and arguably more stable institutional base. Especially when retail investors have been more skeptical and pessimistic about the sustainability of the market rally in recent weeks. Hence, highly volatile stocks like SoundHound AI are likely among the first in the line to feel the downdraft from the market as the Nasdaq has given up most of the gains since the start of the year.

To be fair, yes, it has only been two months for the market, even as we entered the final month in Q1. Therefore, we are far from over, even though there are signs of market reallocation away from the US into Global markets, including China Tech stocks. Does that really mean that the US exceptionalism is finally over and that we should now move all our holdings Into Cash, including AI investors who have been holding on to the conviction, believing that the growth inflection for AI is slightly still in the early innings?

Now, the questions for SoundHound AI investors are multifold.

• Can the company turn profitable?

• Will SOUN's proprietary model be commoditized by Big Tech?

• Is Nvidia’s recent liquidation of its Holdings in SOUN AI stock indicative of a lack of conviction in the voice AI company, or is it something just representative of a reallocation from their Investments?

• Can Nvidia still hold a fort after its recent earnings, where the market seems to have downplayed Jensen Huang's bullishness on Nvidia's growth opportunity in inferencing moving forward?

I believe these are pertinent questions that will continue to dominate the discourse for the Bulls and the Bears in SOUN for some time to come. Particularly as DeepSeek has proven that with innovative AI algorithmic innovations, AI companies can move quickly beyond the seeming lack of compute hardware advantages if they have the right technology stack.

Therefore, I believe it's imperative for investors to remember that SoundHound expects to be on its way to delivering profitability on adjusted EBITDA terms by the end of this year (meaning exiting Q4). Why is it even important? Because it shows that SoundHound AI is able to scale sustainably and demonstrates the viability of its business model, even though it already faces extremely tough competition from Big Tech.

Now we all know that voice AI is the next big thing, as seen with the recent upgrades in Amazon Alexa (AMZN), and the ongoing proliferation of voice AI across multiple industries, such as in retail, restaurants, healthcare, automotive, and more. And these are industries that SOUN has already developed a relationship with and has broken into several companies, underlining the competitiveness of its technology. And that means SOUN likely has a clear path to profitability as long as the AI growth inflection is not anywhere near the end of its growth stage.

SoundHound Agentic AI (SoundHound AI filings)

And you have been following the Agentic AI discussions lately; I believe it's increasingly clear that this will be a very critical opportunity for AI companies and Big Tech this year. I believe that the $325 billion in hyperscalar CapEx investments demonstrate not only the viability, but also the growth potential of even more intensive AI compute requirements moving forward. And as Nvidia CEO Jensen Huang enumerated in the company's recent earnings conference, the AI leader is well positioned to capitalize on inferencing as the next growth vector.

The Agentic AI growth thesis is expected to traverse across several industry verticals that are new or nascent to SoundHound AI, as seen above. The company has also underscored its proprietary Polaris model as underpinning its competitive advantage, although it remains to be seen whether the rapid evolution in AI technologies could overcome their supposed lead. Still, management indicates that it could incorporate the latest developments in advanced AI models into its proprietary technology stack, which should mitigate some of the worries that SOUN might not be competitive moving ahead. These are questions that I don't think investors will have a clear answer at this point in time. However, the confidence of management in its ability to scale and having the assurances to exit Q4 profitably should position SoundHound AI well in 2026 as AI automation takes centerstage.

SOUN estimates (TIKR)

Well, we can certainly look forward to a very impressive growth opportunity in 2025 as the company telegraphed its guidance. Questions about whether the momentum could persist into 2026 will likely remain for now. Therefore, it seems like Wall Street hasn't gone FOMO on SoundHound’s bullish proposition yet, affording the company more time to demonstrate that it has a viable path to scaling up profitably.

I think a critical observation that investors must take away from this is that even though revenue growth is expected to slow through 2026, the company may not need significantly more highly dilutive capital raises this year. SoundHound AI already boasts a $200M cash and equivalents on its balance sheet, and doesn't anticipate any immediate fundraising to further boost its liquidity, which should help to stabilize and consolidate the recent pessimism that saw SOUN fall into a debilitating bear market.

While the threat from Big Tech cannot be understated as they integrate more advanced AI models, SoundHound AI Can demonstrate to investors how it can stave off these competitive threats, as the company is also expected to improve the clarity in its revenue streams, as subscriptions-based revenue and usage base pricing revenue become more prominent over time.

In addition, SoundHound AI anticipates delivering a higher ratio of revenue in the first half as compared to 2024, which should help investors to better analyze and evaluate the execution, heading into 2026, particularly whether the company is on track to meet its adjusted EBITDA profitability targets. Therefore, I think investors have verifiable guideposts along the way for us to parse whether the company can meet its guidance, which should help to stabilize investor sentiments through 2025.

SOUN price chart (weekly, medium-term) (TradingView)

For a start, I believe it's crucial for investors to be cognizant of the fact that SoundHound AI stock demonstrates significant volatility. And therefore, it's extremely challenging to time entries or even anticipate exits, as previous investors consider taking profits.

That being said, it doesn't mean that we cannot take a general directional bias when assessing market sentiments on the stock. Now, it's clear that SOUN is still valued at a substantial premium when compared to its sector peers. SOUN’s forward revenue multiple of more than 23x (in enterprise value terms) is way higher than the sector median of just under 3x. Moreover, the lack of profitability is another consideration that we cannot downplay until SoundHound AI is able to meet its positive adjusted EBITDA target in 2026. Therefore, valuation risk remains one of the stock’s most pressing challenges as the company seeks to justify its growth profile.

A decline of more than 65% from its December highs through the lows last week, saw an opportunity for bullish investors to consider capitalizing, as the stock seems to have formed a bottom. It also coincides with the 50-week moving average, which has been a critical underpinning since its previous consolidation phase in January 2024.

In other words, the general directional bias remains skewed to the upside for SOUN, making a bearish bet likely unwise at the current juncture. While taking a more cautious stance could be appropriate if you do not want to invest in unprofitable growth stocks for now, I believe speculative investors may still consider the bullish reversal signal as an appropriate opportunity to gain exposure to a stock that has the potential to participate in the increasingly bullish conversational AI market as it penetrates across several industry verticals, while fending off the threats from Big tech.

Rating: Upgrade to Speculative Buy.