SoundHound AI (SOUN 3.72%) is a voice artificial intelligence (AI) company that attracted some investor attention after tech giant Nvidia revealed in early 2024 that it had taken a stake in the business. At that point, the stock went on a tear, rising by a staggering 836% that year.
It has been a much different story in 2025. Nvidia sold off its position in SoundHound AI in the fourth quarter of 2024, and now, after a roller-coaster year, the AI stock is down by about 55% from the peak it touched in January. While SoundHound AI's entire stock performance wasn't dependent on Nvidia's investment in the business, it's also hard to understate the effects of it.
Will 2026 be a year when SoundHound AI bounces back and wins over investors based on its own merits and fundamentals, or will it continue to struggle?
Image source: Getty Images.
Sales have been growing, but the bottom line still needs a lot of work
Considering SoundHound AI's impressive revenue growth over the past year, it might at first seem a bit surprising that the stock is doing so poorly. But the raw numbers conceal a couple of problems underneath the hood.
SOUN Revenue (Quarterly YoY Growth) data by YCharts.
The first is that the business has been growing primarily due to acquisitions. Last year, it bought AI company Amelia, which not only boosted its top line but also gave it a presence in many different industries. Up to that point, SoundHound AI's lack of revenue diversification was a key concern, as it relied heavily on customers in the automotive sector.
The second problem is that while it has vastly grown its business, its path toward profitability hasn't shown nearly as much improvement. In the third quarter, its adjusted net loss totaled $13 million, which was an improvement from a loss of nearly $15 million in the prior-year period, but that 13% improvement was a far cry from the 68% revenue growth it achieved. To convince investors it's a good buy, it will likely need to significantly reduce its losses.
The stock's valuation still looks high
Despite the stock's nosedive in 2025, SoundHound AI isn't exactly a bargain. It hasn't given back all the gains it achieved in 2024. And its market cap of about $4.5 billion is more than 7 times what it was valued at two years ago.
Even if you factor in its revenue growth, it's hard to make a case that the stock isn't expensive. In the past two quarters, its sales have been around $42 million. If you assume that they will remain consistent, that would give it annualized sales of around $168 million. And with a market cap of $4.5 billion, that values the stock at a price-to-sales multiple of 27.
That's a high premium for a business that isn't profitable, and that is growing primarily through acquisitions.
NASDAQ: SOUN
Key Data Points
Can SoundHound AI stock rally in 2026?
The core questions about SoundHound AI are how well the business can grow organically and whether it can turn a profit anytime soon. Unless the answers to both questions come out favorably, I don't think the stock will experience much of a rally next year.
Indeed, given its inflated valuation, I think there's a good chance the stock may be due for an even greater decline. If you're interested in SoundHound AI, you may want to be patient and take a wait-and-see approach with the stock, as the company still faces some considerable challenges ahead.
