The Bull and Bear Cases for Investing in SoundHound AI Stock

SoundHound AI (NASDAQ: SOUN) is a voice artificial intelligence (AI) company that has been a polarizing investment. It possesses some exciting growth opportunities in tech, and with a market cap of less than $4 billion, it's fairly small compared to other top AI stocks; thus, there is some compelling upside with it. However, SoundHound has been struggling to get out of the red, and its financials haven't been all that strong.

This year, the stock is down 16% as investor sentiment has soured. Could the stock be a good buy on the dip, or is there more potential trouble ahead for SoundHound AI? Let's look at both the bullish and bearish cases for investing in the company right now.

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Why investing in SoundHound AI may be a good idea

The obvious reason for considering SoundHound AI as an investment is the potential growth it may be able to tap into. Whether it's operating as a voice assistant within vehicles or helping take orders at a drive-thru, there are multiple applications for SoundHound's voice AI services.

Through acquisitions, SoundHound has also been diversifying its customer base so that it isn't dependent on success in the automotive sector. Today, it also serves companies in the financial services, healthcare, retail, and telecommunications sectors. In April, SoundHound announced it was going to acquire LivePerson in a deal worth $43 million. LivePerson is involved in conversational AI and offers a predictable conversational AI platform that can help position SoundHound for greater opportunities in agentic AI. Management says that through this acquisition, the combined company may be able to generate $500 million in revenue, while being on a faster path to profitability and maintaining a strong balance sheet along the way. The transaction could be completed later this year.

Meanwhile, SoundHound AI has been continuing to grow at an impressive pace. When it posted earnings earlier this month, its growth rate for the first three months of 2026 was 52%, with its revenue totaling $44.2 million. The acquisition of LivePerson should open up some considerable opportunities in agentic AI and could position SoundHound for much more growth ahead.

Why SoundHound AI stock has struggled, and may continue to do so

As enticing as SoundHound AI's opportunities may be, that doesn't mean the stock is a no-brainer growth stock to buy. Acquisitions have enabled SoundHound to quickly grow its business and diversify its customer base, but they can also make it challenging for investors to decipher whether the business is truly doing well or if it's just growing its business by acquiring other companies.

The danger with acquisitions is that while they may help grow revenue, they also involve acquiring staff, assets, liabilities, and potential problems. Integrating a new business into a company's existing operations in a way that boosts both sales and profits can be challenging. While LivePerson may sound like an intriguing acquisition for SoundHound, it can also be burdensome; LivePerson incurred a loss of $67 million on revenue totaling $244 million in 2025.

It also burned through more than $30 million just from its day-to-day operating activities last year, which potentially exacerbates SoundHound's existing cash flow issues; over the trailing 12 months, SoundHound has used up more than $105 million in cash from its operating activities.

Without stronger financial results and some evidence that its numbers are getting better (beyond just the top line), SoundHound may continue to struggle to win over investors, despite its seemingly promising potential.

Is SoundHound AI a good option for your portfolio?

SoundHound is one of many companies competing in the voice AI space, and there are stronger tech companies that can dominate in this area with far deeper pockets. A lack of profitability and high cash burn are signs of trouble, suggesting the company may be spending too heavily to acquire new business, and LivePerson may be in a similar situation.

If you have a high tolerance for risk and are willing to be patient, SoundHound AI may be worth considering taking a small position in, given its opportunities. However, for most investors, I think the safest option is just to wait. There's a lot of noise around the company's financials due to its wheeling and dealing in recent years, and that can make it difficult to assess just how strong a growth stock it really is. Until that changes and there's considerable proof that it's growing organically and on a path to profitability, you may want to leave it on a watch list rather than in your portfolio.

David Jagielski, CPA 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.