Down 40% in 2025, Does SoundHound AI Stand a Chance?

Key Points

• SoundHound AI's stock has been a roller coaster ride in 2025.

• SoundHound AI is rapidly growing its sales.

• The stock is valued at a premium to its peers.

• 10 stocks we like better than SoundHound AI ›

SoundHound AI (NASDAQ: SOUN) was one of the most popular artificial intelligence (AI) stocks in 2024, with its share price rising 835% that year. However, 2025 hasn't been so kind, and it's down around 40% for the year.

The majority of the decline occurred at the start of 2025, as the stock cooled off, falling as much as 63% for the year. However, it's starting to climb back, leading investors to believe that SoundHound AI's turnaround story is gaining momentum. The ultimate goal is for SoundHound AI's stock to return to its all-time high of $24, established in December 2024.

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That would indicate a double from here, making SoundHound AI a no-brainer pick if it can accomplish that task. But does it stand a chance?

Image source: Getty Images.

SoundHound AI's revenue is growing rapidly

SoundHound AI is a leader in audio recognition technology. It combines AI with its leading recognition tech, allowing creators to automate various business processes or provide digital assistants that are superior to what's currently available (think Siri or Alexa). In fact, SoundHound AI's technology has been found to outperform its human counterparts in speed and accuracy when deployed at a drive-thru, one of the most common application points for SoundHound AI's technology.

SoundHound AI is also making significant progress in the automotive digital assistant space, as well as in finance and healthcare. SoundHound AI's platform enables its users to automate many customer service interactions, resulting in significant revenue growth for the company.

In the first quarter, SoundHound AI's revenue rose an impressive 151% year over year. Its Q1 revenue totaled $29 million, so it's critical to understand that SoundHound isn't a massive business. But it has the potential to grow into one. Management projects 97% revenue growth for 2025 and also has a massive revenue backlog it's working through. At the end of 2024, its revenue backlog totaled nearly $1.2 billion -- a far higher amount than its current total.

Should SoundHound AI convert this backlog into actual revenue over the next few years, it could be poised for significant growth, making a return to its $24 high inevitable. But is there already too much optimism baked into the stock?

SoundHound AI needs to grow into its valuation

SoundHound AI isn't a cheap stock by any means. It trades for 41 times sales.

SOUN PS Ratio data by YCharts. PS = price-to-sales.

Considering that most software companies are typically valued between 10 and 20 times their sales, this seems like a significant red flag for the stock. However, most software companies aren't doubling their revenue year over year, making SoundHound's stock more difficult to assess.

Should SoundHound AI double its revenue over the next four quarters, that would reduce its price-to-sales (P/S) ratio by half, making it appear more reasonable. However, if SoundHound AI's growth rate remains at an elevated level, the stock will likely rise in tandem, making it appear to never be cheap.

As a result, investors need to project what 2026 sales growth will look like. If it projects to be strong, then SoundHound AI could be primed for more upside. If it starts to slow down, then the stock may have reached its ceiling. We'll have to see if management drops any hints about 2026 during its second-quarter conference call, but that'll be the key factor in determining whether SoundHound AI's stock is a smart buy here or not.

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.