Why SoundHound AI Stock Plummeted 46% in the First Half of 2025 but Has Been Bouncing Back

Key Points

• SoundHound AI stock saw a massive rally at the end of 2024, but its share price pulled back in the first half of 2025.

• There were multiple catalysts that contributed to the conversational AI specialist's valuation decline.

• SoundHound AI's share price has actually benefited from a big rally over the last few months.

• 10 stocks we like better than SoundHound AI ›

SoundHound AI (NASDAQ: SOUN) stock saw a dramatic valuation pullback across the first half of this year's trading. The company's share price fell 45.9% January through June despite a gain of 5.5% for the S&P 500 index across the stretch.

SoundHound's valuation pullback in the first half of 2025 was partially a reaction to the strong gains that the stock saw in 2024. Some macroeconomic and business-specific catalysts also caused investors to sell shares, but the stock has also been on a winning streak in recent trading.

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Why SoundHound AI stock sank in 2025's first half

SoundHound AI stock got off to a rough start this year. The conversational artificial intelligence (AI) specialist saw a steep valuation decline after Chinese AI firm DeepSeek rolled out its R1 model. SoundHound AI stock was also hit with pullbacks in conjunction with this year's CES expo.

Investors had been hoping that the company would announce some groundbreaking new products or partnerships at CES, but the trade show wound up producing less favorable indicators. Nvidia made announcements about its intentions to expand in the agentic AI space that SoundHound AI is looking at as a key growth market.

SoundHound AI stock then got hit with another big pullback in conjunction with Nvidia-related news. In February, the AI hardware leader submitted its investment holdings to the Securities and Exchange Commission (SEC), and the routine disclosure revealed that Nvidia had sold its stake in SoundHound AI. Nvidia's investment in the company had played a significant role in powering valuation gains for the company, and news of the divestment prompted a substantial sell-off for SoundHound AI.

The stock did see a spike in May after the company published its first-quarter results. Sales increased 151% year over year to reach $29.1 million, and the business posted a non-GAAP (adjusted) loss of $0.06 per share in the period. Revenue in the quarter came in significantly ahead of the market's target, and the stock moved higher after the earnings report.

What's next for SoundHound AI?

SoundHound AI stock has gained ground in July's trading as investors have ramped up bets on growth stocks. The company's share price is up roughly 8% in the month so far as I write this.

SoundHound AI is guiding for sales this year to come in between $157 million and $177 million. If the company were to hit the midpoint of its sales guidance target, that would mean delivering annual sales growth of roughly 97% over the $84.7 million in revenue it posted last year. Hitting that midpoint would also mean a substantial acceleration over the annual sales growth of 85% the business posted last year.

Valued at roughly 29 times this year's expected sales, SoundHound AI has a heavily growth-dependent valuation, but the sales ramp for its services has been impressive so far.

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Keith Noonan 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.