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Why SoundHound AI Stock Skyrocketed 835.8% in 2024 but Is Plummeting in 2025

Source The Motley Fool

SoundHound AI (NASDAQ: SOUN) stock was one of the market's biggest winners in 2024. The company's share price skyrocketed 835.8% across last year's trading, according to data from S&P Global Market Intelligence.

SOUN Chart

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SOUN data by YCharts

SoundHound AI is an early leader in the conversational artificial intelligence (AI) space, and its share price saw massive growth last year in conjunction with rising demand for voice-based software interfaces and other positive catalysts. The stock got a big boost early in 2024's trading after it was announced that Nvidia had invested in the company, and it saw bullish momentum accelerate late in the year following some enthusiastic endorsements from analysts.

How SoundHound AI stock wound up being one of 2024's biggest winners

SoundHound AI stock posted big gains in 2024 thanks to quarterly reports that arrived with strong revenue growth. For example, the company's third-quarter report showed that sales in the period had risen 89% year over year to reach $25.1 million. Thanks to stronger-than-expected performance, the company also raised its sales growth target for 2024 to between $82 million and $85 million -- suggesting annual growth of roughly 82% at the midpoint of the guidance range. The company also raised its sales guidance for 2025 to between $155 million and $175 million, which suggests that revenue will more than double this year if the business hits the midpoint of management's guidance.

While the company's share price actually saw pullback on some of its earnings releases this year, the results were ultimately strong enough to support subsequent bullish coverage from analysts that helped push the company's valuation higher. On Dec. 16, Wedbush analyst Dan Ives published new coverage that maintained a buy rating on SoundHound and raised the firm's one-year price target on the stock from $10 per share to $22 per share. On Dec. 23, H.C. Wainwright published a note on the stock, raising its one-year price target from $8 per share to $26 per share.

SoundHound AI stock also posted big gains in conjunction with new partnership and service announcements across last year. The company announced that restaurant chains including Torchy's Tacos and Church's Texas Chicken had begun using its services. SoundHound stock saw gains in conjunction with auto conglomerate Stellantis rolling out its conversational AI platform for some of its automobiles.

Why is SoundHound AI stock plummeting in 2025?

SoundHound AI stock has been losing ground early in 2025's trading amid macroeconomic pressures, concerns about new competition, and geopolitical risk factors. The company's share price is down 33% across the year's trading as of this writing.

This year's annual CES kicked off with a keynote speech from Nvidia CEO Jensen Huang on Jan. 6 and ran through Jan. 10. Some investors had been hoping that the tech leader would give SoundHound AI a shoutout, but this never materialized. Instead, new agentic AI software from Nvidia and other tech players was highlighted at the show, and investors are concerned that the conversational AI specialist could soon face more competition.

As a company with a highly growth-dependent valuation, SoundHound AI stock has also seen outsized sell-offs in conjunction with rising macroeconomic and geopolitical risks. The latest report from the Bureau of Labor Statistics showed that far more jobs than expected were added in December, which has raised concerns that inflationary pressures could return. Adding another bearish catalyst, the U.S. has announced new regulations on the export of AI chip stocks to China and other adversarial nations.

Even on the heels of big sell-offs in 2025, the company's share price is still up 625% over the last year of trading. The company now has a market capitalization of $4.9 billion and is trading at approximately 30 times this year's expected sales. With a strong sales growth outlook for this year, SoundHound AI stock has avenues to getting back to an upward trajectory. But the company's highly growth-dependent valuation could also set the stage for continued volatility if macroeconomic and geopolitical conditions cause investors to become more risk averse.

Should you invest $1,000 in SoundHound AI right now?

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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