SoundHound AI Plunges 10.22%—Is the AI Boom Losing Momentum?

Summary
• SoundHound AI (SOUN) trades at $13.305, down 10.22% from $14.82
• Intraday range spans $13.19–$14.825
• Turnover hits 39.8 million shares, 10.86% of float
• EBIT margin at -175.3% signals operational struggles

SoundHound AI’s stock has imploded amid a perfect storm of market jitters and operational red flags. The AI sector’s volatility is amplifying investor anxiety as SOUN’s price collapses to a 52-week low of $4.32. With a dynamic P/E of 49.39 and a cash outflow of $24.5M, the company faces a critical juncture. Traders are now scrutinizing technical indicators and options activity to gauge the next move.

Operational Red Flags and Sector-Wide Jitters Fuel Sell-Off
The 10.22% intraday plunge in SOUN reflects a confluence of factors: a -175.3% EBIT margin, negative operating cash flow of $24.5M, and a 40.5% gross margin. Recent earnings highlighted $84.69M revenue but underscored unsustainable cost structures. Analysts cite 'discrepancies between anticipated growth and present performance,' while sector-wide economic volatility—exacerbated by Microsoft’s -1.57% decline—has amplified risk-off sentiment. The stock’s collapse aligns with broader tech sector jitters, as investors reassess AI’s commercial viability amid rising operational costs.

Software—Application Sector Under Pressure as Microsoft Slides 1.57%
The Software—Application sector is underperforming, with Microsoft (MSFT) down 1.57% and SoundHound AI plunging 10.22%. While SOUN’s drop is steeper, the sector’s -0.54% S&P 500 drag highlights systemic fragility. Microsoft’s decline, though milder, signals investor caution toward tech giants. SOUN’s 49.39 P/E ratio contrasts sharply with MSFT’s 32.1, suggesting SOUN’s valuation is more vulnerable to earnings shortfalls.

Capitalizing on Volatility: SOUX ETF and Strategic Options Plays
• 200D MA: $11.32 (below current price), 30D MA: $12.44
• RSI: 71.44 (overbought), MACD: 1.23 (bullish divergence)
• Bollinger Bands: $7.90–$17.31 (current price near lower band)
• Key Levels: Support at $11.65, resistance at $13.50
• SOUX ETF: -20.5% (leverage 2x SOUN exposure)

Short-term traders should prioritize SOUN20250829P13.5 for bearish exposure, while aggressive bulls may test SOUN20250829C14.5 if SOUN breaks above $14.50. Watch for a breakdown below $12.60 to validate the bearish case.

Top Options:
• SOUN20250829P13.5
- Type: Put, Strike: $13.50, Exp: 2025-08-29
- IV: 82.30% (high volatility), Leverage: 16.77%, Delta: -0.485 (moderate sensitivity), Theta: -0.005878 (slow decay), Gamma: 0.208 (high sensitivity to price swings), Turnover: 72,159
- Payoff: 5% downside to $12.68 → max(0, $13.50 - $12.68) = $0.82/share. Ideal for short-term bearish bets with high gamma to capitalize on volatility.
• SOUN20250829C14.5
- Type: Call, Strike: $14.50, Exp: 2025-08-29
- IV: 83.24% (extreme volatility), Leverage: 35.30%, Delta: 0.323 (moderate directional bias), Theta: -0.0473 (rapid decay), Gamma: 0.185 (responsive to price swings), Turnover: 71,817
- Payoff: 5% downside to $12.68 → max(0, $12.68 - $14.50) = $0. Aggressive bulls may target a rebound above $14.50, leveraging high leverage and gamma for a breakout play.

If $12.60 breaks, SOUN20250829P13.5 offers short-side potential. Aggressive bulls may consider SOUN20250829C14.5 into a bounce above $14.50.

Backtest SoundHound AI Stock Performance
The backtest of Sonic Automotive (SOUN) after an intraday plunge of 10% shows favorable performance, with win rates and returns indicating positive short-to-medium-term gains. Here's a detailed analysis:1. Event Frequency and Win Rates: - The event occurred 435 times over the backtested period. - The 3-day win rate was 49.89%, the 10-day win rate was 53.10%, and the 30-day win rate was 63.45%.2. Returns: - The average 3-day return was 2.38%. - The average 10-day return was 5.18%. - The average 30-day return was 16.16%. - The maximum return during the backtest was 30.56%, achieved on day 59 after the event.The data suggests that Sonic Automotive tends to recover and even exceed its pre-plunge levels in the short to medium term, making it a potentially attractive investment opportunity following significant downturns. However, it's important to note that past performance is not always indicative of future results, and investors should consider their risk tolerance and investment horizon before making decisions.

Act Now: Short-Term Volatility Presents Strategic Entry Points
SoundHound AI’s 10.22% drop has created a high-risk, high-reward scenario. The stock’s technicals suggest a potential rebound from $11.65 support, but the -175.3% EBIT margin and $24.5M cash outflow pose long-term risks. Microsoft’s -1.57% decline underscores sector-wide fragility. Traders should monitor SOUN20250829P13.5 for a bearish play and SOUN20250829C14.5 for a breakout. Watch for a breakdown below $12.60 or a rebound above $14.50 to dictate next steps.