Investor Warns: SoundHound AI Stock is Overvalued Despite Promising Growth

SoundHound AI's stock has surged 50% over the past three months, driven by growing revenues and a $1.2 billion sales backlog. Investor Julia Ostian is cautious, citing high valuation (40x trailing sales) and decreasing gross margins. While excited about the company's expansion into healthcare and cash reserves, Ostian believes the risks outweigh the potential returns, cautioning against betting on sentiment.

SoundHound AI's (NASDAQ: SOUN) stock has surged 50% over the past three months, driven by significant growth in revenues and a substantial $1.2 billion sales backlog. The company's advanced voice AI solutions have been increasingly adopted across various industries, including restaurants, healthcare, and automotive, contributing to its robust financial performance. However, investor Julia Ostian has expressed caution, citing high valuation and decreasing gross margins as potential risks.

Revenue Growth and Sales Backlog

SoundHound AI's revenue grew 73% year-over-year (YoY) to $11.6 million in Q1 2024, according to its latest financial results [1]. This growth was fueled by partnerships with major players like Applebee's and a quick-service restaurant (QSR) with over 2,000 outlets. The company's backlog of booked sales also surged 80% YoY to $682 million, reflecting long-term contracts with clients like Stellantis and EV manufacturers. The $1.2 billion sales backlog underscores the company's strong market demand and growth prospects.

Expansion into Healthcare

SoundHound AI's expansion into the healthcare sector is another key driver of its growth. The company's voice AI solutions are being integrated into healthcare applications, enhancing user experiences through seamless voice interactions. This move positions SoundHound AI to tap into a $160 billion addressable market for voice AI transactions [2]. The company's strategic collaboration with global giants like Tencent and its showcase at Nvidia's GPU Technology Conference 2025 have bolstered its international footprint, further solidifying its global growth strategy.

Risks and Considerations

While SoundHound AI's financial performance has been impressive, there are several risks and considerations that investors should be aware of. Julia Ostian has cited high valuation (40x trailing sales) and decreasing gross margins as potential risks. The company's gross margin dipped to 60% in Q1 2024, largely due to integration costs from acquisitions. However, non-GAAP metrics show narrowing losses, suggesting operational discipline [1].

Additionally, SoundHound AI faces competition from tech giants like Apple and Google, which dominate voice AI in automotive and consumer applications. The company's edge lies in its specialization in voice-first solutions for specific industries, not generic AI. Despite these challenges, SoundHound AI's niche expertise and agility could position it to outperform in its target markets.

Investment Thesis

Investors seeking exposure to AI-driven operational innovation may find SoundHound AI's trajectory appealing. The company's cash reserves, backlog growth, and industry specialization position it to outperform as voice AI becomes more prevalent in high-volume industries. However, near-term volatility is possible, and investors should exercise caution given the high valuation and decreasing gross margins.

Conclusion

SoundHound AI's stock surge is driven by growing revenues and a substantial sales backlog, reflecting the company's strong market demand and growth prospects. The company's expansion into healthcare and its strategic collaborations with global giants are key drivers of its growth. However, investors should be aware of potential risks, including high valuation and competition from tech giants. For investors seeking exposure to AI-driven operational innovation, SoundHound AI's trajectory merits a close look, despite the challenges it faces.

References

[1] https://www.ainvest.com/news/soundhound-ai-soun-leveraging-voice-ai-drive-restaurant-efficiency-long-term-growth-2507/
[2] https://247wallst.com/investing/2025/07/14/can-soundhound-ais-global-growth-make-it-an-ai-behemoth/