Sometimes, stocks that were previously popular fall out of favor, prompting deal-hungry investors to take a closer look. With shares down by 34% over the last 12 months, Soundhound AI (SOUN +1.02%) certainly fits into the category.
Shares in the company, which provides voice recognition technology powered by artificial intelligence (AI), soared in early 2024 after filings showed that the industry-leading chipmaker Nvidia owned a stake, only to fall back down to earth when the hype faded and the market realized that Nvidia had sold its position.
In the future, SoundHound's performance will likely depend on its actual fundamentals. Investors will be curious to know if it can maintain its above-average growth, establish a moat against competition, and -- most importantly -- demonstrate a pathway to sustainable profitability. Let's dig deeper to see what the next five years might have in store.
A natural synergy between technologies
Automated speech-recognition software has been around for a while now. We are all familiar with Apple's digital assistant Siri, which came out in 2011, as well as those interactive voice response (IVR) systems used (somewhat frustratingly) for customer service. AI large language models (LLMs) fix the limitations of these older technologies by allowing them to actually interact with the user in a more useful and humanlike way.
NASDAQ: SOUN
Key Data Points
The combination of speech recognition with LLMs will be key to bringing AI into some of its most exciting uses over the long term, such as humanoid robots. However, for now, SoundHound is tackling the opportunity's low-hanging fruit, such as restaurant drive-thrus, customer service digital agents, and hands-free automotive assistants.
Image source: Getty Images.
Company documents suggest the technology can create real value for early adopters. SoundHound claims that its Dynamic Drive-Thru software can complete orders 10% faster than a human agent, potentially increasing a restaurant's hourly revenue by $35.56 -- a number that could add up tremendously over multiple months across multiple locations. If SoundHound can position its software as a profitability booster for clients, that could go a long way to increasing its own customer retention.
The company has also seen early results in the automotive industry, where it has partnerships with industry leaders like Stellantis, which uses its voice assistant across its DS luxury car lineup in Europe.
Business is booming, but at what cost?
SoundHound's operations are growing rapidly, with third-quarter revenue increasing 68% year over year to $42 million. Top-line growth rates in the high double digits would be great news for most companies.
But investors should remember that growth stocks are not valued based on growth for its own sake. What actually matters is how the market expects the company to scale up its future earnings. And when you look at it that way, SoundHound's third-quarter performance is less impressive.
For starters, the company is expanding through acquisitions. Most recently, this included the $60 million buyout of customer service AI start-up Interactions in late 2025. This deal follows other large purchases in 2024, like AI agentic specialist Amelia and food-ordering platform Allset. While these acquisitions can drive growth in the near term, they can turn out to be net negatives by draining capital and ballooning losses.
SoundHound's net losses actually soared 402% year over year to $109.3 million in the third quarter, a colossal amount of money for a $4.6 billion company to lose in three months. And it shows that the acquisition-led strategy may actually be increasing the long-term risk of failure. Investors should expect management to continue relying on dilutive capital raises (which means creating and issuing new units of stock) to fund its operations and continue buying other companies.
SoundHound remains a hold
SoundHound AI is tackling a very compelling niche in the generative AI software industry, but its huge losses and reliance on acquisitions to drive growth make the risks seem to outweigh the rewards right now.
It's no surprise that shares performed poorly in 2025. And although the company could continue to experience periodic booms based on short-term hype, these rallies probably won't last. The downside looks set to continue until management can demonstrate a clear pathway to profitability.
