Why SoundHound AI Stock Fell 8% This Morning

Key Points

• SoundHound AI stock surged earlier in the week but lost ground on Thursday.

• Thursday's pullback is a typical reaction after a speculative price spike.

• The stock is still trading above Wall Street's average price target.

• 10 stocks we like better than SoundHound AI ›

Shares of SoundHound AI (NASDAQ: SOUN) cooled down on Thursday, ending a string of positive price moves. The stock surged 16.3% higher from the long weekend to Wednesday evening, but gave back as much as 8.1% of those gains today. At 2:50 p.m. ET, SoundHound AI's shares are down by 5.2%.

When someone else's party sends your stock soaring

This week's surge was based on a broader wave of interest in a certain type of artificial intelligence (AI) company. A splashy buyout in the so-called agentic AI subsector drove SoundHound AI's stock 17% higher on Tuesday morning. This deal involved Paris-based technology consulting giant Capgemini (OTC: CGEMY) picking up sector rival WNS (NYSE: WNS) from Mumbai in a $3.3 billion buyout. It didn't involve SoundHound AI directly, but the acquisition reminded many investors of SoundHound AI's agentic AI chops.

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The buzz is fading today since SoundHound AI didn't immediately follow up on the market buzz with a buyout bid or a new agentic AI product of its own.

Image source: Getty Images.

Today's drop isn't as dramatic as it looks

Today's price drop looks like the next natural step in a speculative price spike. SoundHound AI still trades approximately 4% above Wall Street's average price target, and the stock has nearly tripled over the last year.

As always, I'm impressed by SoundHound AI's top-notch voice recognition tools and expect the company to do well in the long run. At the same time, the stock is soaring a bit too high for my tastes, even after Thursday's minor correction.

SOUN Operating Revenue (Quarterly YoY Growth) data by YCharts. YoY = year over year.

The company will report second-quarter results in August. Keep an eye on that report, focusing on SoundHound AI's conversion of a large order backlog into actual revenues. Agentic AI functions will play a part in this long-term process, which, as shown in the chart above, is off to a good start.

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Anders Bylund has positions in SoundHound AI. The Motley Fool recommends Wns (Holdings). The Motley Fool has a disclosure policy.