Why SoundHound AI Stock Plummeted Last Week

Key Points

• SoundHound AI stock is still up big over the past three months, but it got with a double-digit valuation pullback this past week.

• Investors felt less confident in growth-dependent AI stocks after a new report from MIT.

• News related to inflation and interest rates also drove selloffs, but investors actually got some good news late in the week.

• 10 stocks we like better than SoundHound AI ›

SoundHound AI (NASDAQ: SOUN) stock got hit with a big pullback over the last week of trading. The company's share price was down 19.4% from its level at the previous week's market close heading into the market open this past Friday. Meanwhile, the S&P 500 rose 0.3% across the stretch, and the tech-heavy Nasdaq Composite fell roughly 0.6%.

Tech stocks have been facing bearish pressures this week, and SoundHound AI has seen some big selloffs as a result of new research highlighting concerns about valuations in the artificial intelligence (AI) space and macroeconomic indicators that could point to a more challenging environment for growth stocks. While the conversational AI specialist has seen a big valuation pullback this week, its share price is still up roughly 31.5% over the past three months of trading.

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Image source: Getty Images.

SoundHound AI stock sank in response to a new MIT report

On Tuesday, the Massachusetts Institute of Technology (MIT) released new research results suggesting that most businesses have yet to see real bottom-line improvements connected to their investments in generative AI. According to MIT's new report, 95% of the businesses that it incorporated as part of its study were still in the red on their AI investments. The research triggered substantial valuation pullbacks for many AI stocks, and SoundHound AI was among the companies hit with big selloffs.

Macroeconomic indicators also caused big moves for SoundHound AI

Last week, the Bureau of Labor Statistics published its Produce Price Index report for July, and the data showed levels of inflation that were far higher than economists had anticipated. With inflationary trends coming in hotter than expected in the wholesaler market, alarm bells were raised that higher levels of inflation would soon arrive in the consumer sector of the economy. Quarterly updates from some of the U.S.'s biggest retailers added to the weight of those fears this week, but investors got a big relief thanks to a speech from Federal Reserve Chair Jerome Powell on Friday.

In his speech, Powell seemingly indicated that signs of slowing growth in the U.S. economy had become a bigger factor than current inflationary pressures when it comes to the Fed's approach to interest rate policy. If the Fed cut rates next month, it could help strengthen bullish momentum for SoundHound AI stock.

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Keith Noonan 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.