This Magnificent Artificial Intelligence (AI) Stock Is Down 50%. Buy the Dip, or Run for the Hills?

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SoundHound AI (SOUN) garnered significant attention among investors when Nvidia revealed its ownership stake last year. The stock initially skyrocketed on the surge of excitement, but has since lost momentum and is now over 50% below its peak value.

The question is whether that drop is a red flag or a buying opportunity.

Looking to combine voice and agentic AI

I found myself observing SoundHound, a pioneering voice technology company that surpasses conventional speech recognition. Their unique “speech-to-meaning” and “deep meaning understanding” technologies are engineered to do more than just transcribe words into text. Instead, they strive to comprehend the intent of a speaker in real time, even before the speaker has completed their thought.

SoundHound has managed to secure a significant presence in both the automobile and restaurant sectors. Notable car manufacturers like Hyundai and Stellantis are utilizing its platform to enhance voice assistance within their vehicles, while fast-food chains are integrating its technology into drive-thrus, phone orders, and self-service kiosks. The company is making substantial progress in these industries, but this is just one chapter of its story.

In 2024, when the company acquired Amelia for $80 million, they also obtained a specialized area – Amelia’s expertise in creating virtual agents for sectors such as healthcare, insurance, and financial services. These industries present challenges like compliance requirements, intricate transactions, and industry-specific terminology that make voice integration more complex for consumer-facing applications.

SoundHound acquired Amelia not just for its client base in specific industries, but also to tap into its technological capabilities. In other words, this move enabled the company to blend its superior speech recognition tech with Amelia’s intelligent conversation system.

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Additionally, Amelia contributed a crucial element that allowed SoundHound to transcend traditional voice-based AI and venture into the realm of self-governing artificial intelligence known as agentic AI. In other words, SoundHound is no longer aiming to be just a voice-focused AI firm; instead, it’s redefining itself as a company specializing in autonomous voice agent technology.

Making a significant stride towards its vision, the company unveiled its Amelia 7.0 platform. This advanced system functions as a digital workforce member, capable of comprehending intentions, reasoning logically, conversing fluidly with humans, and autonomously carrying out tasks. Unlike some chatbots that may falter during interruptions or when faced with rephrased queries, Amelia 7.0’s voice-first technology enables it to shine in such situations.

Amelia is capable of being connected to various business systems, including ERP systems, CRM systems, help desks, bank systems, as well as health and insurance platforms. She’s also proficient in performing specialized tasks for different industries.

In healthcare, this system could assist a patient in contacting the appropriate specialist, arranging an appointment, obtaining pre-approval, and providing insurance details. On the other hand, when it comes to financial services, tasks such as transferring balances, resolving transaction disputes, or even executing intricate stock and options trades could be handled by this system.

Such a voice AI platform could prove to be a significant cost-reducer for businesses, opening up a vast potential for growth. Yet, it’s crucial to acknowledge that there are substantial tasks ahead for it to accomplish.

All about execution

In the first quarter, SoundHound recorded a significant 151% increase in revenue. However, it remains unprofitable, and its profit margins have been squeezed. The recent Amelia deal added some lower-margin old contracts to their portfolio, and ongoing amortization costs from this acquisition are impacting their reported earnings. According to standard accounting practices (GAAP), the gross margin fell to 36.5% last quarter, but when adjusted for certain factors, it rose to 50.8%.

SoundHound plans to raise its net profit margin over time, aiming for it to surpass 70%. This level was last achieved during the final quarter of 2023, prior to the completion of the Amelia deal. The company’s management has emphasized that enhancing their profit margin is a top priority. As low-profit contracts conclude and are renegotiated, these figures should become more favorable.

From where I stand, the journey ahead is primarily focused on execution. SoundHound, with its captivating technology and unique offerings, certainly stands out. Yet, it’s confronted by larger competitors who possess greater resources and substantial pre-existing user bases, making for a tough battle in the market.

The recent drop in the stock is primarily influenced by investor sentiment and evaluation rather than its projected growth. To be frank, this stock has rarely been considered affordable, and it seems unlikely to change any time soon. However, this is often true for businesses boasting significant future prospects.

Should SoundHound manage to establish itself as a leading proactive AI company, the dip in stock prices might appear as an unexpected windfall. Yet, should it falter during implementation or be surpassed by a more formidable competitor, even its robust technology wouldn’t shield it from the consequences.

The reality is that even the most advanced technology doesn’t necessarily come out on top all the time. This lesson was learned by Sony, a company with firsthand experience, when its superior Betamax technology lost to VHS in the early days of video cassette recorders (VCRs). However, when DVDs were introduced, Sony’s Blu-ray technology emerged victorious over HD DVD, despite being considered the weaker choice by some. Only time will tell which company will lead in artificial intelligence agents.

Is SoundHound stock a buy?

SoundHound operates where voice artificial intelligence (AI) and AI agents meet, a sector that could turn out to be incredibly vast. Given its market capitalization under $5 billion, the company’s stock has plenty of room for growth if it manages to establish itself as a key player within this market.

From my perspective as an enthusiast, investing in SoundHound’s stocks represents a high-stakes wager on a potentially game-changing trend. For those with a long-term outlook and the ability to navigate market fluctuations, seizing this dip could prove to be a golden opportunity. However, bear in mind that this stock carries a substantial risk-reward ratio.

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2025-07-20 11:05