Down 52%, Should You Buy the Dip on SoundHound AI?

It can be sobering for investors when a stock sheds some 50% of its value. That's exactly what has happened to shares of SoundHound AI (NASDAQ: SOUN) so far in 2025. This is likely thanks to a combination of factors, including an expensive valuation following last year's stunning rally, overall negativity in the stock market due to the tariff-fueled trade war, and the ongoing conflict in the Middle East.

The good thing is that shares of the voice artificial intelligence (AI) specialist can now be bought at a relatively cheaper valuation. So should investors buy the stock in anticipation of more upside? Or would it be a good idea to stay away despite its pullback? Let's find out.

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Analysts are expecting SoundHound AI to bounce back

Six of the nine analysts covering SoundHound suggest buying it right now, while the remaining three have a hold position on the stock. What's worth noting here is that SoundHound's 12-month price target of $12 points toward a potential upside of 25% from current levels. That's despite the stock's hefty price-to-sales ratio of 34.

Of course, the stock is relatively cheaper when compared to its sales multiple of 90 at the end of 2024, but it's still richly valued when compared to the U.S. technology sector index's sales multiple of 8. Even then, analysts are expecting SoundHound AI to jump nicely in the coming year.

That's not surprising. The massive opportunity in the voice AI solutions market has supercharged the company's growth, which is why it is expected to justify its valuation.

The voice AI market's terrific growth could be a long-term tailwind

SoundHound is scratching the surface of a huge end-market opportunity. According to one estimate, the voice AI solutions market was worth an estimated $5.4 billion last year, growing 25% from the prior year. The market is expected to grow at a faster pace in the future, recording annual growth of 30% through 2029 and generating $50 billion in annual revenue.

The company has been expanding at a much faster pace than its end market. Its first-quarter revenue shot up a phenomenal 151% from the year-ago period. Its revenue guidance of $157 million to $177 million indicates that its top line is on track to double from 2024 levels. However, it wouldn't be surprising to see SoundHound blowing past its guidance, as its voice AI solutions are gaining traction in several industries.

No single SoundHound customer accounted for more than 10% of the company's revenue in Q1. The company now has a presence across multiple verticals, including the automotive, restaurant, healthcare, retail, travel, finance sectors. Even better, it has been quickly bringing new customers on board, and existing customers continue to renew their contracts for developing and deploying voice AI solutions.

Looking ahead, SoundHound investors can continue to expect an expansion in its customer base. It's pushing the envelope on the product development front, which should allow it to maintain its above-average growth. For instance, SoundHound's recently released agentic voice AI platform can help its clients reduce costs and improve productivity by developing automated voice AI agents that can interact with customers and solve their problems.

So, there is a good chance that SoundHound's existing customer base will adopt this new service from the company, driving incremental growth in both revenue and margins. Additionally, revenue from the voice AI agents market is projected to grow at an annual rate of 35% through 2034, suggesting that there's another terrific opportunity for SoundHound to sustain its impressive growth rates for a long time to come.

There's a possibility that the company could keep growing at a faster pace than the voice AI market and capture a bigger share of this niche. SoundHound's 2024 revenue of $85 million means that it controlled a 1.5% share of this space last year (based on the $5.4 billion estimate of the overall market).

Assuming it can increase its share to even 5% after five years, its top line could jump to $2.5 billion (based on the $50 billion market size estimate in 2029). Even if SoundHound trades at a significantly discounted 8 times sales at that time (in line with the U.S. technology sector's average sales multiple), the company's market capitalization could hit $20 billion. That would be more than five times its current market value.

So, investors looking to buy a growth stock right now can consider using SoundHound's big pullback this year as a buying opportunity, since it has the potential to deliver big gains in the long run.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.