Stock-Split Watch: Is SoundHound AI (SOUN) Next?

Unlike 2024, this year has seen a considerably fewer number of tech companies choosing to split their stocks. But with the market's persistent enthusiasm for artificial intelligence (AI) driving many tech stocks sharply higher in 2025, some are sensing that stock-split activity may soon ramp up again.

Over the past year, for example, SoundHound AI (NASDAQ: SOUN) stock has skyrocketed more than 260% as investors celebrate the company's success with its conversational AI platform Amelia 7, which is winning favor with customers and market researchers alike. As a result, some investors have begun to question whether management may choose to split its stock in the near future. Are they right to recognize this as a possibility?

Below, I'll take a closer look at the likelihood that SoundHound AI will soon appear on the stock-split calendar.

Image source: Getty Images.

SoundHound stock spoke loudly to investors in 2024

For the most part, SoundHound stock's strong performance over the past year is attributable to its gains at the end of 2024. In November, for example, the company reported surprisingly strong third-quarter 2024 results.

Beating analysts' top- and bottom-line estimates, SoundHound reported revenue of $25.1 million and adjusted earnings per share (EPS) of negative $0.04. It also projected an auspicious fiscal 2025 -- guiding for revenue of $155 million to $175 million -- while analysts expected $152.1 million.

With 2024 winding down, analysts presented investors with a gift during the holiday season -- providing increasingly bullish outlooks on SoundHound stock. In December, Wedbush Securities hiked its price target on SoundHound stock to $22 from $10, and H.C. Wainwright lifted its price target to $26 from $8.

Thanks to the company's surprisingly good Q3 2024 performance, its 2025 forecast, and analysts' optimistic outlooks for its stock, SoundHound stock logged an 836% gain in 2024.

Will investors soon hear news of a stock split from this voice-recognition leader?

Many investors have a strong desire to identify potential stock splits, hoping that if they buy shares before the stock splits, they will be better off financially. After all, they'll own a larger number of shares after the split is completed.

However, savvy investors recognize that this reasoning is far from valid. Similar to how dividing a slice of pecan pie into thirds doesn't give you three times as much nutty deliciousness as a single pie, investors aren't in a more advantageous position if they have more shares after a forward stock split. There's no change in the value of the investment.

If this is so, what motivates companies to split their stocks? There are several reasons, though it's most often because their stocks' prices have climbed to levels that may preclude or discourage some investors from buying a single share. In light of this, investors who are investigating SoundHound will likely conclude that, with shares rising as high as about $25 over the past year and currently trading around $19 recently, it's highly unlikely that management will find it necessary to implement a stock split.

Is now the time for AI investors to load up on SoundHound AI?

While there are companies that may be likely to execute stock splits in the near future, SoundHound is unlikely to be one of them. But does this mean that the stock should immediately be disqualified from appearing on the buy lists of AI investors? Absolutely not.

On the company's second-quarter 2025 conference call, management raised its 2025 revenue forecast to between $160 million and $178 million from sales guidance of $155 million to $175 million that it offered in November 2024. But wait, there's more. Management also stated its belief that the company could end 2025 having achieved positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). For context, SoundHound reported adjusted EBITDA of negative $61.9 million in 2024.

With no debt, SoundHound is in a strong financial position -- one that may improve further if it achieves profitability on an adjusted EBITDA basis by the end of the year. For AI investors, SoundHound's industry leadership (thanks to the Amelia AI agent platform) in voice recognition solutions, as well as its improving financials makes the stock a strong buy consideration right now, regardless of the unlikelihood that its stock will split anytime soon.

Scott Levine 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.