SoundHound AI Stock Is Down 16% in 2026. Is This the Ultimate Buying Opportunity, or Is More Downside Ahead?

Artificial intelligence (AI) stocks continue to lead the broader market higher, but not every name in this emerging space has been a winner recently. SoundHound AI (NASDAQ: SOUN) stock, for instance, is down by about 16% this year and is now trading around 66% below its late 2024 record high.

SoundHound is a leading developer of conversational AI software, but some investors have pared their exposure to its stock because of its high valuation and the company's slowing revenue growth. But could this dip be the ultimate long-term buying opportunity?

Image source: Getty Images.

SoundHound is on an acquisition spree

Before 2024, SoundHound had a relatively narrow product portfolio. It primarily sold conversational AI software to quick-service restaurant chains and automakers. But when it acquired rival conversational AI company Amelia, it expanded its reach into a host of other industries. It now also serves businesses in healthcare, financial services, insurance, telecommunications, retail, and more.

Following that acquisition, SoundHound launched a platform called Amelia 7, which allows businesses to seamlessly build custom AI agents to serve customers and help employees streamline workflows. Healthcare provider Allina Health used Amelia to build an AI agent called Alli that the company says has improved its call center service levels by around 23%.

In April, SoundHound announced its plan to acquire LivePerson, which built a digital engagement platform to help businesses better serve their customers with AI. LivePerson powers 1 billion messages per month across chat applications, websites, social media channels, and more. SoundHound says the deal will expand its reach to even more industries and significantly boost its revenue.

Fast -- but slowing -- revenue growth

SoundHound generated $44.2 million in revenue during the first quarter, a 52% increase from the year-ago period. Although that was a fast growth rate, it was slower than the blistering 151% growth the company delivered in the same quarter of 2025. This deceleration has become a trend. As a result, many investors are reconsidering SoundHound's now lofty valuation.

In its Q1 report on May 7, the company reiterated its full-year revenue guidance for 2026, telling investors it expects to generate somewhere between $225 million and $260 million in sales. However, thanks to the acquisition of LivePerson, management says revenue could come in as high as $400 million during 2027, with a further $100 million in potential upside depending on operational performance.

SoundHound's bottom line is another point of focus for investors, because scaling an AI business isn't cheap, so expenses often grow faster than revenue. The company suffered a $25 million loss on a generally accepted accounting principles (GAAP) basis during the first quarter, and a loss of $26.5 million on an adjusted basis.

Fortunately, SoundHound ended the quarter with $216 million in cash and equivalents on its books, and no debt, so it can afford to sustain losses at those levels for a while. But if the company doesn't achieve consistent profitability in the next year or so, it might have to raise more money, which could involve diluting existing shareholders, denting their future returns.

SoundHound stock still isn't cheap

Although SoundHound stock is down 66% from its peak, its price-to-sales (P/S) ratio of 19.1 still makes it one of the most expensive names in the AI software industry. I've included a few comparisons in the chart below.

SOUN PS Ratio data by YCharts.

I would normally caution investors against paying such a steep premium for a stock like SoundHound AI, especially given the early-stage nature of its business. However, if we assume the company will produce around $400 million in revenue next year, then its forward P/S ratio is just 9. That is actually quite attractive considering the AI revolution is just getting started, so there is a lot of room for the company to continue expanding.

Therefore, investors who are willing to hold SoundHound AI stock for three to five years or more could reap solid returns, but if you choose to invest, it might be a good idea to make this position a relatively small part of your portfolio to keep the risk level in check.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends SoundHound AI. The Motley Fool has a disclosure policy.