SoundHound AI (NASDAQ: SOUN) stock is sinking in Tuesday’s daily trading session. The company’s share price was down 11.9% as of 1:10 p.m. ET, according to data from S&P Global Market Intelligence.
Artificial intelligence (AI) stocks are seeing an uptick in bearish momentum today following news that Advanced Micro Devices may need to secure a special export license before it can sell some of its processors in China. While there isn’t any fresh, business-specific news for SoundHound today, the company is getting caught up in the broader pullback. With today’s sell-off, SoundHound stock is now down roughly 33% from its high in 2024.
What does AMD’s news mean for SoundHound stock?
The possibility that AMD, Nvidia, and other designers of high-performance processors could face additional roadblocks to selling their technologies in China probably doesn’t mean much for SoundHound’s near-term business outlook. The company generates most of its revenue from U.S.-based customers, and it’s unlikely that the U.S. or other Western governments would introduce obstacles to selling its software in the Chinese market.
On the other hand, it’s possible that rising tensions between the U.S. and China could cause investors to become more cautious about the market at large — and AI stocks in particular. Artificial intelligence has emerged as a new frontier in the technological arms race between the competing world powers, and geopolitical dynamics are a key risk factor for AI investors to monitor and analyze.
What’s next for SoundHound AI?
SoundHound is coming off a recent fourth-quarter report that Wall Street found broadly disappointing. While the company’s revenue rose 80.5% year over year to come in at $17.15 million, it missed the average analyst sales target by roughly $0.6 million. The company’s per-share loss of $0.07 also came in higher than Wall Street’s target for a per-share loss of $0.06 in the period.
For its current fiscal year, SoundHound expects to record revenue between $63 million and $77 million. At the midpoint of its guidance range, that would represent a roughly 52.5% annual increase over the $45.9 million in sales that it posted last year. That’s a healthy growth rate, although the company’s sales target also factors in some contribution from Synq3 — the voice-based AI company SoundHound is set to acquire this quarter.
Looking ahead to 2025, SoundHound expects to record more than $100 million in sales — suggesting annual growth of roughly 43% based on the midpoint of this year’s target sales range. Notably, the company said that it ended last quarter with $661 million in backlogged orders, but right now the audio-tech specialist’s valuation looks highly growth dependent.
Even after today’s pullback, SoundHound AI is valued at roughly 22 times this year’s expected sales.
Should you invest $1,000 in SoundHound AI right now?
Before you buy stock in SoundHound AI, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 26, 2024
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
Why SoundHound AI Stock Is Plummeting Again Today was originally published by The Motley Fool
