Is SoundHound AI (SOUN) a Buy?

I've been on the verge of recommending SoundHound AI (NASDAQ: SOUN) for ages. The company always looked promising, but the stock was too expensive.

Well, the artificial intelligence (AI) expert has turned a corner in my view. I'm finally comfortable buying this stock, as the valuation makes sense from a long-term perspective these days. Mind you, SoundHound AI's stock still isn't cheap, and many things could go wrong along the way to game-changing business results.

But it's time to give SoundHound AI a serious look as your next investment idea.

The story so far

SoundHound AI isn't the new kid on the block. I mean, it's a newish stock on the Wall Street block, entering the public market as recently as April 2022. But its namesake mobile app has been around since the very beginning of the smartphone era, identifying songs with AI analytics way back in 2009. If anything, it's the old guy around the corner with a newfound purpose.

That app isn't SoundHound AI's main business anymore, though. Updates published in the last three years have mainly been bugfix packages or added support for new Android and iOS versions. The company shifted into an entirely new gear with its market entry, merging with a special purpose acquisition company (SPAC), as was the style of the time. Management is using that $244 million shot of fresh funding and a couple of small equity sales to finance an ambitious business plan.

These days, SoundHound AI's voice interpretation software helps other companies run their business. You may run into the Houndify platform the next time you're navigating a phone-based menu system. Its conversational AI also powers drive-through and phone ordering systems for household-name restaurants such as Five Guys, Jersey Mike's, Red Lobster, Chipotle Mexican Grill, and Panda Express. If you recently bought a new Stellantis car in Japan or Europe, you'd use SoundHound AI's voice controls to change the radio channel, search the navigation maps, or lock the doors.

This software already has plenty of real-world use cases, some of which were developed in collaboration with mighty Nvidia (NASDAQ: NVDA). SoundHound AI is a regular presenter at recent Nvidia conferences, and CEO Keyvan Mohajer gets business feedback from Nvidia counterpart Jensen Huang. That's an unbeatable backroom connection.

Meme stock nonsense in 2024

As you can see, SoundHound AI is an up-and-coming business with serious real-world value -- but that hasn't stopped the stock market from playing irresponsible games with its stock.

It started with a minimal investment. Nvidia bought $3.7 million of SoundHound AI stock in the fourth quarter of 2023. The voice controls specialist's market cap was a minuscule $582 million on Feb. 14, 2024 -- a rather ordinary Valentine's Day. The next day, Nvidia disclosed its SoundHound AI investment in a bland regulatory filing.

You'd think the investment would go unnoticed, since it represented just 0.6% of SoundHound AI's pre-disclosure market value. But the stock soared 19% the next day and 284% over the following month.

Tiny or not, that Nvidia investment launched SoundHound AI's stock into the stratosphere. With low trading volumes and a small market cap, this event quickly brought SoundHound AI into the meme stock world.

The next few months were full of social media chatter. A single Reddit post could launch or hamstring the stock at the drop of an online hat. The meme stock action culminated around the 2024 holidays, as influencers attempted to set up a short squeeze. Trading volumes spiked, the stock price followed suit for a few days -- and then SoundHound AI's stock started to calm down.

Image source: Getty Images.

The next chapter: SoundHound AI's business is solidifying

I don't see SoundHound AI on the leading meme stock trackers anymore. The social media focus has shifted again. SoundHound AI's short-sale ratio stabilized in the spring and dropped in tandem with the stock price more recently. Meanwhile, the business is turning an important corner.

SoundHound AI is launching new products, such as an agentic AI system and vehicle-based restaurant reservation services. Stellantis's Jeep brand now offers SoundHound AI voice controls with ChatGPT integration across the European market, and an American push can't be far behind. The list of business wins is long, but you get the gist.

And SoundHound AI is converting its well-known backlog of long-term contracts into solid revenues. Top-line sales rose 68% year over year in Q3 2025, and management expects breakeven earnings before taxes, depreciation, and amortization (EBITDA) in Q4. Granted, that target is based on the high end of management's revenue guidance, and adjusted EBITDA profits aren't the cleanest profitability metric out there, but it's certainly a step in the right direction.

The setup today: Execution up, froth down

Management sees multiple billion-dollar target markets on the long-term horizon. Voice controls should evolve into a commonplace feature in several high-growth areas, adding up to a $140 billion total addressable market. SoundHound AI is barely scratching the surface of that opportunity, and I think it's time to take a bullish stand on this stock.

SoundHound AI's stock is trading 52% below its yearly highs as of this writing on Nov. 25. Shares are changing hands at 33.7 times trailing sales, which makes it more expensive than Nvidia's 22.8 multiple. However, that's still a steep drop from 111x in December 2024, and SoundHound AI's sales are rising rapidly.

I have called this stock "expensive" many times recently, and sometimes at prices below the current level. But the business has grown stronger in the meantime, which changes the risk-to-reward calculation. At this point, I don't mind picking up a few SoundHound AI shares at an unusually reasonable valuation.

Anders Bylund has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Nvidia. The Motley Fool recommends Reddit and Stellantis and recommends the following options: short December 2025 $45 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.