SoundHound AI, Inc. (SOUN): A Bear Case Theory

We came across a bearish thesis on SoundHound AI, Inc. (SOUN) on Substack by Stefan Waldhauser. In this article, we will summarize the bears’ thesis on SOUN. SoundHound AI, Inc. (SOUN)'s share was trading at $10.27 as of May 19^th. SOUN’s forward P/E was 147.06 according to Yahoo Finance.

SoundHound AI, a Silicon Valley-based company founded in 2005, develops artificial intelligence technologies for speech, sound, and natural language. After going public via a SPAC merger in 2022, the company reported modest 2023 revenues of $46 million, offset by an operating loss of $64 million. In 2024, amid widespread AI market enthusiasm, SoundHound aggressively expanded by acquiring three unprofitable companies. These acquisitions fueled top-line growth, with Q1 2025 revenues reaching $29.1 million—a 151% year-over-year increase. However, this growth came at a steep cost. Losses ballooned alongside revenue, with SoundHound reporting a staggering $188 million net loss over the last four quarters, despite generating just $102 million in total revenue. Cash burn also exceeded $107 million over that period, meaning the company is spending more than it earns by a wide margin.

Despite these troubling fundamentals, SoundHound trades at an astonishing valuation of over $4 billion, or approximately 25 times expected current-year sales—an extreme multiple for a company plagued by integration challenges, an unsustainable cost structure, and mounting losses. This kind of valuation suggests a complete disconnect from underlying business reality, fueled by AI hype rather than sound financial metrics. The stock is arguably worth only a small fraction of its current price, making it a prime candidate for short sellers as the AI frenzy inevitably corrects and valuations normalize in line with fundamentals.

SoundHound AI, Inc. (SOUN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held SOUN at the end of the fourth quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of SOUN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SOUN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.