SoundHound AI's (SOUN) Stock Plunges After Nvidia's Exit

SoundHound AI, Inc. (SOUN) shares experienced a sharp decline on Friday, February 14, 2025, following Nvidia's (NVDA) disclosure in a 13F filing that it had completely dissolved its stake in the company. This news raised questions about SoundHound AI's future growth and stability, as Nvidia's backing likely provided credibility and confidence for other investors. The stock price fell 29.3% to $10.79 at the time of writing, according to Benzinga Pro.

SoundHound AI has been expanding its technology's presence in various applications, such as restaurant ordering platforms and the automotive industry. The company has also announced partnerships with luxury electric vehicle manufacturers like Lucid Group, which could further drive revenue growth. However, the field of conversational AI is growing crowded, with large, well-funded rivals like Apple, Alphabet, and Amazon already established in the market. This competition could pose challenges for SoundHound AI's ability to maintain its market share.



SoundHound AI has been unprofitable since its inception and has been burning through cash at a significant rate. In the third quarter of 2024, the company's net loss was $21.8 million, a 45% increase from the previous year. Additionally, the company's free cash flow margin was negative 134%, indicating that it was spending $134 for every $100 it made. This high cash burn rate is not sustainable and will need to be addressed for the company to ensure long-term financial stability.

Despite the recent setback, some analysts remain optimistic about SoundHound AI's prospects. There are seven analysts covering the stock, with a one-year consensus price target of $12.36 per share, implying a 12% upside in the stock. However, given the company's unprofitability and high cash burn rate, investors should carefully evaluate the risks and opportunities before making a decision to buy the stock.

In conclusion, SoundHound AI's stock price plummeted following Nvidia's exit, raising concerns about the company's future growth and stability. While the company has been expanding its technology's presence in various applications and has announced partnerships with luxury electric vehicle manufacturers, it faces intense competition in the conversational AI market. SoundHound AI's unprofitability and high cash burn rate also pose significant challenges to its long-term financial sustainability. Investors should carefully consider these factors before making a decision to buy the stock.