Why SoundHound AI Stock Lost 39% Last Month

Shares of SoundHound AI (NASDAQ: SOUN) fell 39.4% in December 2025, according to data from S&P Global Market Intelligence. The stock has been incredibly volatile over the last two years, and December continued that trend. Investors, analysts, and meme-stock traders alike are trying to find a reasonable price range for SoundHound AI's explosive but unprofitable business.

Good news, bad timing for SoundHound AI

SoundHound AI didn't have bad news for investors last month. In fact, I would argue that the voice control specialist signed a pretty significant partnership that should have moved the stock upward. SoundHound AI integrated its hands-free restaurant booking systems with Booking Holdings (NASDAQ: BKNG) subsidiary OpenTable, adding more than 60,000 restaurant locations to its user-friendly booking tools.

That sounds like a bullish move to me, but that day actually marked the start of December's price drops. That wasn't necessarily SoundHound AI's fault, though.

The market as a whole stepped away from unprofitable growth stocks in the middle of December. SoundHound AI fits that higher-risk profile to a T, as the company only recently started to generate revenues from a large and growing backlog of long-term contracts. The company might not turn a bottom-line profit for several years, running its business on $269 million in debt-free cash reserves and the occasional stock sale.

SoundHound AI posted 68% year-over-year revenue growth in November's Q3 2025 earnings report, proving its high-octane business growth trajectory. Still, Wall Street simply wasn't interested in this classic hypergrowth strategy last month.

Image source: Getty Images.

The meme stock fog is finally lifting

As of this writing on Jan. 7, SoundHound AI's stock is trading 50% below October's 52-week peak. Now and then, it acts like a classic meme stock by soaring on flimsy news or silly social media posting campaigns.

But the online jibber-jabber has faded out, the daily trading volume fell 48% in three months, and the artificial price boost has gone away. These are classic signs of a former meme stock mania evolving into a healthier growth stock story.

The company still has to follow through on the promise I see in it. Multi-year contracts will generate revenue and profits only if SoundHound AI delivers high-quality AI systems for voice-driven technologies. Resting on its laurels could result in larger rivals such as Microsoft (NASDAQ: MSFT) or Apple (NASDAQ: AAPL) catching up to SoundHound AI's lead in accurate interpretation. The risk is real, but the management team is experienced, competent, and innovative. Did you know that CEO Keyvan Mohajer has been getting business advice directly from Nvidia (NASDAQ: NVDA) CEO Jensen Huang for about a decade? As mentors go, that's a strong connection.

These days, I'm more than comfortable with buying SoundHound AI shares. The company has been developing artificial intelligence (AI) tools for 20 years, and you can still be an early investor in its human-to-computer communication research.

Anders Bylund has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Apple, Booking Holdings, Microsoft, Nvidia, and SoundHound AI. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.