SoundHound AI Stock Hasn't Been This Cheap in Over 2 Years. Is Now the Time to Buy?
Key Points
SoundHound AI has experienced strong growth in recent quarters, but it remains unprofitable.
It has encouraging long-term opportunities in the voice artificial intelligence (AI) market.
In a rising-interest-rate environment, however, investors have been unwilling to take a chance on the stock.
Shares of voice artificial intelligence (AI) company SoundHound AI (NASDAQ:SOUN) have been in a seemingly endless tailspin this year. And the sell-off didn't begin in 2026, as the stock, which has lost more than half of its value this year, is down more than 75% in the past 12 months.
The last time SoundHound traded at these levels was around September 2024. That was the year that the stock skyrocketed more than 835% after investors learned Nvidia had invested in the business. Nvidia, however, would ultimately exit its position in SoundHound.
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Excitement around the stock has effectively faded, even though it has some tremendous opportunities in AI, which could lead to further growth for the business in the future. Could now be a good time to buy SoundHound AI stock?
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SoundHound's been growing its top line, but investors may be more concerned about the bottom line
At first glance, SoundHound may appear to be a great, underrated growth stock to own. In its most recent quarter, which went up until the end of June, its revenue rose by 45%, totaling $61.9 million. It was a terrific quarter, but not if you looked further down the income statement.
The company incurred an operating loss of $43.3 million. And over the past two quarters, it has burned through just under $60 million in cash from its day-to-day operating activities, which is up from a burn rate of $43.7 million during the same period a year ago.
Investing in a cash-burning business at a time when interest rates are rising isn't a terribly exciting prospect for most investors to consider. Alas, it's not terribly surprising that the company's acquisition-fueled growth isn't enough to win over investors.
The stock is cheap, but that doesn't mean it can't go lower
Simply investing in a stock because it has declined significantly in value and may seem overdue for a bounce back is a dangerous idea. SoundHound's market cap is around $2.1 billion, and it may seem incredibly modest, but there's a valid reason the market is bearish on the stock -- its business just doesn't look all that good. It's also hard to gauge how well it's growing organically because SoundHound has been leaning heavily on acquisitions.
Without a clear path to profitability and an end to its cash burn, there's no compelling reason to suggest that the business is on the right track and that the stock should trade at a higher value. It could continue to go lower. Until its financials improve drastically, I'd steer clear of this troubled AI stock.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and SoundHound AI. The Motley Fool has a disclosure policy.