SoundHound AI (SOUN 5.67%) was a darling stock in 2024. At one point in late December, shares were up over 1,000% for the year, but then it sold off as investors took gains.

That sell-off continued into 2025 and then reaccelerated as AI stocks in general sold off over economic fears caused by tariff uncertainty. SoundHound AI's stock now sits around 65% down from its all-time highs.

That's a massive drop, and investors are probably wondering if the worst is behind them. So, is now an opportune time to buy shares of this AI stock?

SoundHound has a strong use case in an AI-powered world

SoundHound AI rose to prominence when it was revealed in early 2024 that AI giant Nvidia took a position in it. This ignited an initial run-up, and it was compounded by fantastic quarterly results throughout the year.

As investors took gains at the end of 2024 and into 2025, the stock sold off. And a further drop occurred in February when it was revealed that Nvidia sold off its shares.

The market assumed that this was Nvidia no longer believing in the company, but I don't think that's the case. Nvidia owned about 1.73 million shares of SoundHound AI, which would have been valued at nearly $42 million at its peak.

While that's a lot for you and me, it's nothing for Nvidia. During its last quarter, the chipmaker had more than $43 billion in cash and short-term equivalents on its balance sheet. Those are big numbers, so let's make this analogy a little smaller. Would you care if you had $1,000 and something happened with $1? That's how much of Nvidia's financial picture was tied to SoundHound's stock.

So, I don't think investors should read too much into Nvidia's sale of the stock -- there's still a solid company here.

SoundHound AI's technology focuses on integrating AI and audio recognition. Although this technology has existed for some time (think Apple's Siri or Amazon's Alexa), the execution has been quite poor.

The company's product is much better and is good enough to outperform human counterparts in applications like taking drive-thru orders. It also has a huge market in digital assistants for automobiles, as well as financial, insurance, and healthcare services.

Current generative AI models usually use text inputs to prompt a response, but using a keyboard isn't always practical. That's where SoundHound's audio recognition software has a massive use case.

This huge opportunity is already showing up in the company's financial results, with incredible growth at the end of the year.

Growth is projected to be robust in 2025

SoundHound AI grew its revenue by 101% to $34.5 million in the fourth quarter. That marks a strong reacceleration, and it's expected to continue throughout 2025.

SOUN Operating Revenue (Quarterly YoY Growth) data by YCharts; YoY = year over year.

For 2025, management expects about 97% growth. That's a rapid increase, and it would be a great sign for the company to continue at that rate. It would bring SoundHound AI's 2025 revenue to about $167 million, but there's far more revenue beyond that.

SoundHound has an important metric that investors should monitor: revenue backlog. This measures the remaining value of the contracts it has signed with its clients. These contracts can be terminated at any time, so revenue isn't guaranteed, but it gives investors an idea of what the growth trajectory may look like. The company's revenue backlog sits at nearly $1.2 billion, so after 2025 sales are pulled out, there's still $1 billion left of contract value.

So, it's clear there's still plenty of growth ahead for SoundHound, especially as it takes on new customers and encourages existing ones to expand their spending.

This is key, as SoundHound AI is still valued like it's going to grow quickly.

SOUN PS Ratio data by YCharts; PS = price to sales.

At 32 times sales, it's still above the level it has traded at for most of its life on the market. However, it hasn't sustained a nearly 100% revenue growth for an entire year. Should SoundHound's revenue double, that would bring its valuation to around 16 times sales, which is a common level that software companies trade around. If that occurs, then the stock's potential returns will be tied to how quickly the company can grow in 2026 and beyond.

We've already seen that SoundHound has a massive revenue backlog that indicates strong growth, so I think today's price is worth paying if you're willing to hold the stock for at least three years. If you hold it that long and the company continues to grow revenue at a rapid pace in 2026 and 2027, the stock will likely crush the market and make today's price look cheap.

However, suppose growth slows or you sell the stock due to worsening market conditions despite revenue still growing at the threshold management established. In that case, this may not be a great purchase.

SoundHound AI will be a volatile stock. Investors must hold through that volatility as long as the company stays on the right track.