Is SoundHound AI a Strong Buy After the Massive 58% Pullback?

The days of ordering from a human at drive-thrus and by phone are numbered. The rise of artificial intelligence (AI), particularly the emergence of conversational intelligence, combined with businesses' desire for efficiency and cost savings, makes the transition from human to automated processes inevitable. Thanks to AI, machines can "understand" human speech in real time.

The change is also being introduced in automobiles. Where previously the vehicle could process "Call John Smith," new AI-powered assistants can process complex sentences like "Find a restaurant within five miles of my route that has excellent reviews and serves cheeseburgers." The difference is night and day. Finally, there is tremendous demand for AI-powered agents in call centers. Imagine not being put on hold, but having your issue resolved quickly with the help of AI. This isn't science fiction anymore; it's science reality.

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SoundHound AI (NASDAQ: SOUN) is one of the leading software companies making conversational intelligence a reality, and the addressable market is massive, estimated at $140 billion, according to the company.

Image source: Getty Images.

What happened to SoundHound stock?

As you can see below, investors in SoundHound stock have been on quite a roller-coaster ride.

SOUN data by YCharts

From July 2024 to the stock's peak in December 2024, it gained a whopping 523%, driven by AI euphoria. During that time, its price-to-sales (P/S) ratio rose to over 110, and I cautioned investors to be patient and wait for a better entry point. With the stock down 58% from its high, that time may be approaching.

Is SoundHound stock a buy now?

As mentioned above, SoundHound's software is deployable by restaurants, automobile companies, and other industries that utilize customer service agents. The company has recently secured an impressive string of customer wins, partnering with well-known brands such as Church's Chicken, White Castle, Chipotle, Jersey Mike's, Hyundai, Lucid, Allina Health, and many more. These wins led to a significant surge in revenue.

Sales in 2024 increased 85% over the prior year, reaching $85 million. Then in Q1, 2025, sales leaped 150% year over year to $29 million. It also finished with $226 million in cash and no long-term debt. The company guided for total sales of $157 million to $177 million in 2025. The midpoint would represent an impressive 96% increase over 2024. SoundHound isn't consistently profitable yet; however, growth and customer wins are the most important metrics at this stage, especially since the company has enough cash on hand to fund operations for quite some time.

The valuation is much more palatable now than it was during its dizzying rise in late 2024, as shown below.

SOUN PS Ratio data by YCharts

The P/S ratio based on the last 12 months' sales is 35, slightly below its one-year average. This drops to 25 when considering forward-looking sales. This is by no means "cheap;" however, the exponential growth rate and massive available market suggest that the company can quickly grow into its valuation. SoundHound stock isn't a no-brainer at this valuation. Still, given its impressive technology, terrific market opportunity, and fast-growing customer base, it's worth considering a small investment now and buying the dip if the stock continues to decline.

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Bradley Guichard has the following options: long January 2027 $20 calls on SoundHound AI. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.