Shares of SoundHound AI (SOUN -5.82%) had a field day on Tuesday. The stock gained as much as 17.9%, peaking at 10:10 a.m. ET, before settling down to a 14% gain as of 3 p.m. ET. This does not appear to be a meme stock push, as most sources report very limited SoundHound AI discussion in the usual meme-oriented investing channels.
Instead, Tuesday's big jump stemmed from a sudden boom of investor interest in so-called agentic artificial intelligence (AI) solutions.
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Why SoundHound AI's stock suddenly took off
SoundHound AI's trading volume tripled against its three-month average. The buzz around agentic AI rose overnight due to a $3.3 billion acquisition in the Indian market. As a result, many investors were reminded of the massive gains a company like SoundHound AI can see over time, as several industries lean into the agentic AI future.
As a reminder, agentic AI involves automated systems taking several steps to draw up an overall strategy for solving complex problems. That blueprint is then turned over to one or more specialized AI tools that can measure their success against the agent-managed overview. This process is more self-sufficient than the single-task AI tools you've seen emerge in recent years, paving the way to a more autonomous AI system.
SoundHound AI's Amelia and Houndify platforms come with several agentic workflows, driven by the company's signature voice commands.
Let this red-hot stock cool down a bit
It's nice to see SoundHound AI's stock rising thanks to widespread discussion of a solid AI trend. However, the stock still looks overpriced, as its plethora of long-term service contracts will take years to generate significant revenues.
I hesitate to recommend SoundHound AI's stock at these lofty valuation ratios. You'll probably do better in the long run if you wait for this overheated stock to cool down a bit before you pounce on that tempting "buy" button.
