Is SoundHound Stock a Buy Now?

Artificial intelligence (AI) stocks are shaping up to be the biggest stocks of the decade. Stocks like Nvidia and Palantir have generated huge returns and created massive fortunes already.

However, there are other, less well-known AI stocks, too. Today, let's examine one from the fascinating field of voice AI, SoundHound AI (NASDAQ: SOUN).

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The bull case for SoundHound

To get started, let's examine the reasons why SoundHound stock looks like a buy right now.

First, the company is growing incredibly fast. As of its most recent quarter (for the three months ending on March 31, 2025), SoundHound reported eye-popping revenue growth of 151%, with quarterly revenue rising from $11.6 million to $29.1 million.

The automotive and restaurant sectors remain key drivers of SoundHound's growth, and these were highlighted during its earnings release:

• SoundHound announced the expansion of its partnership with "one of the largest pizza chains in the U.S.," where SoundHound provides phone answering solutions.
• SoundHound extended its joint offering of voice assistant generative AI for autos, which runs on Nvidia's Drive AGX.

In addition, the company announced the expansion of several existing partnerships and the start of numerous new pilot programs across the retail, healthcare, and financial services sectors.

This ongoing momentum points toward the potential growth of SoundHound's total addressable market (TAM), as organizations continue to reimagine how they can use AI to cut costs and increase productivity.

Finally, the analyst community remains bullish on SoundHound stock. According to data compiled by Yahoo! Finance, five of the eight sell-side analysts covering SoundHound stock rate it as a "strong buy" or "buy." None rate it as a sell. The average analyst price target is $11.81, implying 19% upside as of this writing.

The bear case and risks

Now, let's examine the bear case and risks for SoundHound stock.

First, one must remember that SoundHound is a very young and very small company. Its total revenue over the last 12 months amounted to $102 million. For comparison, Meta Platforms generates five times as much revenue every day.

Accordingly, SoundHound isn't yet profitable, and, crucially, it doesn't generate positive free cash flow. Over the last 12 months, SoundHound reported a net loss of $188 million and free cash flow of negative $107 million. However, these risks are somewhat offset by the fact that SoundHound has a solid balance sheet, with more than $245 million in cash and only $5 million in debt.

In addition to its lack of profits, the company's competitive situation raises other concerns. The AI ecosystem is extremely dynamic, with deep-pocketed companies eagerly jumping into new businesses. It's quite possible that big tech giants like Microsoft, Amazon, Alphabet, Meta, or others could become fierce competitors for SoundHound. On the other hand, any of the aforementioned companies could also gobble up SoundHound -- its current market cap of less than $4 billion is but a rounding error for the tech giants.

Finally, SoundHound's deep penetration of the automotive and hospitality sectors is a double-edged sword. With much of the company's revenue coming from those industries, any downturns within those sectors could put a damper on SoundHound's rapid growth, leaving investors out in the cold.

Is SoundHound AI stock a buy now?

SoundHound is a young company in a dynamic and fast-changing industry. However, it's not a stock for every investor. Its high valuation -- at the time of this writing its price-to-sales (P/S) ratio is 36 -- puts it well out of reach for value-minded investors.

However, for growth-seeking investors who are looking for a mid-cap stock with plenty of upside, SoundHound is worth considering. A dollar-cost averaging approach, combined with a buy-and-hold mindset, could pay off as the voice AI market continues to grow in the years to come.

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

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Alphabet, Amazon, and Nvidia and has the following options: long January 2026 $10 calls on SoundHound AI and long July 2025 $425 puts on Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. 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.