This speculative audio AI inventory may wrestle to justify its sky-high valuations.
SoundHound AI (SOUN 0.92%) has taken its traders on a wild journey over the previous three years. The specialist in audio and speech recognition software program went public by merging with a particular goal acquisition firm on April 28, 2022. The shares opened at $8.72 and skyrocketed to an all-time excessive of $24.23 on Dec. 26, 2024.
However in the present day, they commerce at about $8.11. Let’s examine why the inventory took a rollercoaster worth journey over the previous three years that places it just under its debut worth, and if it has a shot at revisiting its file excessive over the following three years.
Picture supply: Getty Photos.
What occurred to SoundHound AI over the previous three years?
SoundHound’s namesake app helps individuals establish songs by just a few seconds of recorded audio or perhaps a few hummed bars. Its developer-focused platform, Houndify, permits firms to create custom-made voice recognition instruments.
Houndify faces competitors from tech giants like Microsoft, Alphabet‘s Google, and Apple, which all combine their very own voice recognition companies into their apps and companies. Nevertheless, Houndify is an interesting possibility for firms that need to construct customized voice companies with out tethering themselves to a much bigger tech ecosystem. Automakers like Hyundai, smart-TV makers like Walmart‘s Vizio, and fast-food chains like Church’s Texas Rooster all use Houndify to energy their AI companies.
Its income rose 47% in 2022, 47% in 2023, and 85% to $84.7 million in 2024. That trajectory is spectacular, however administration initially claimed the corporate may generate $255 million in income in 2024 throughout a pre-merger presentation in late 2021.
Furthermore, a number of SoundHound’s progress in 2023 and 2024 was pushed by acquisitions, together with the restaurant AI firm SYNQ3, the web food-ordering platform Allset, and the conversational AI firm Amelia. These acquisitions expanded its ecosystem, however in addition they elevate some considerations concerning the long-term natural progress of its core enterprise. The acquisitions are additionally weighing down its margins because it integrates these new companies.
Its margins beneath adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) improved from destructive 361% in 2022 to destructive 73% in 2024. However earlier than it went public, it claimed its adjusted EBITDA margin would flip constructive in 2024. It missed that purpose even after it laid off practically half of its workforce in 2023.
What’s going to occur to SoundHound over the following three years?
The worldwide marketplace for speech and voice recognition may nonetheless have a compound annual progress charge (CAGR) of 27.6% from 2025 to 2030, in accordance with Markets and Markets, pushed by new automation, customer support, and safety functions. SoundHound has been tossing extra irons into the hearth to capitalize from that secular growth.
Its acquisitions of SYNQ3 and Allset ought to improve its presence within the restaurant business, its integration of Amelia ought to complement its partnership with the AI chatbot maker Perplexity to improve its personal in-house giant language fashions (LLMs), and it has been integrating its personal voice recognition instruments into Nvidia‘s Drive platform for related and autonomous automobiles. Nvidia as soon as held 1.7 million shares of SoundHound AI, nevertheless it bought all these shares earlier this 12 months.
From 2024 to 2026, analysts anticipate SoundHound’s income to have a CAGR of 59% to succeed in $215 million. However with an enterprise worth of $3.29 billion, it is already valued at 20 instances this 12 months’s gross sales. It has additionally greater than doubled its variety of shares since its SPAC merger with its secondary choices and excessive stock-based compensation bills.
That frothy valuation and ongoing dilution may restrict its upside, particularly if fears of upper tariffs, sticky inflation, and elevated rates of interest proceed to drive traders away from speculative progress shares on this wobbly market. SoundHound claims it might obtain a constructive adjusted EBITDA margin by the top of 2025, however analysts nonetheless anticipate its annual adjusted EBITDA to stay destructive this 12 months and solely flip barely constructive in 2026.
The place will SoundHound AI’s inventory be in three years?
Assuming SoundHound matches analysts’ estimates, has a CAGR of 40% for its prime line from 2026 to 2028, and nonetheless trades at 20 instances ahead gross sales, its inventory may rise practically 155% to round $21.63 per share by the start of 2028. However even in that best-case state of affairs, it most likely will not revisit its all-time highs.
That is perhaps why Nvidia liquidated its total stake in SoundHound, and why its insiders did not purchase a single share as they bought a half-million shares over the previous three months. So, in a much less rosy state of affairs, the corporate’s progress may cool off and its valuations may shrink over the following three years. If that occurs, its inventory worth may get minimize in half and nonetheless be costly.
Subsequently, I imagine SoundHound AI inventory may stagnate or slide decrease over the following three years. It is nonetheless rising, however its valuations are too excessive, it is relying an excessive amount of on acquisitions, and it hasn’t proved its enterprise mannequin is sustainable but.
Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Leo Solar has positions in Apple. The Motley Idiot has positions in and recommends Alphabet, Apple, Microsoft, Nvidia, and Walmart. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
