SoundHound AI Stock Sank Today -- Is the Artificial Intelligence Company a Buy?

Key Points

• SoundHound AI stock saw a pullback Thursday, but there wasn't any major news driving the move.

• The conversational AI specialist's stock has been highly volatile over the last year.

• SoundHound AI's highly growth-dependent valuation makes it a risky play, but it could still deliver wins over the long term.

• 10 stocks we like better than SoundHound AI ›

SoundHound AI (NASDAQ: SOUN) stock saw a pullback in Thursday's trading. The company's share price fell 4.7% in the session and had been down as much as 8.1% earlier in trading.

While there doesn't appear to have been any major business-specific news behind the pullback, investors may have moved to take profits after a pop for the company's share price earlier in the week. Despite today's pullback, the stock is still up roughly 9% over the last week of trading. Even more striking, the company's share price is up roughly 39% over the last three months.

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Is SoundHound AI stock a good buy right now?

SoundHound AI has been highly volatile over the last year of trading. While the company's share price is still up roughly 197% across the stretch, it's also still down approximatley 49% from its peak in the period.

Even as the company's sales base has ramped up rapidly, sales growth has continued to accelerate. Revenue increased 151% year over year in the first quarter of the company's current fiscal year, which ended March 31. The company still only posted $29.1 million in sales in the period, but sales growth in the quarter marked a dramatic improvement over the 73% annual growth it posted in the prior-year period.

SoundHound is an early mover in the voice-based agentic artificial intelligence (AI) space, and it has huge expansion potential over the long term -- but its valuation profile still comes with a risk. The company now has a market capitalization of roughly $4.9 billion and is valued at approximately 31 times this year's expected sales.

For investors with a very high risk tolerance, SoundHound AI could still be a worthwhile investment. The company has been posting very impressive sales momentum, but its valuation already prices in a lot of strong growth in the future. If you're looking to build a position in SoundHound AI stock, using a dollar-cost-averaging strategy for your purchases may be better than buying in all at once at today's prices.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.