SoundHound AI stock drops 60% from peak

SoundHound AI has seen a drastic decline in its stock price, now down 60% from its all-time high. The company had a remarkable year in 2024, with its stock rising over 800%. However, after reaching its peak in December, the stock has fallen sharply. What makes SoundHound AI unique is its focus on audio technology for artificial intelligence. Instead of processing text, it specializes in understanding spoken commands. The company's software is currently popular in restaurants and automotive sectors, helping to automate drive-thru services and function as a digital assistant in vehicles. Despite the recent stock drop, SoundHound AI continues to grow. In the last quarter, the company reported a 101% increase in revenue compared to the previous year. For 2025, management anticipates revenues could nearly double, suggesting strong future growth. The stock's high valuation was a factor in its decline. At its peak, it was valued at over 100 times its revenue, making it hard to justify. The current valuation is still over 40 times revenue, which is considered high for most software companies. Investors are closely watching a key metric known as bookings backlog, which indicates potential future revenue from contracts signed. After the last quarter, this backlog stood at $1.2 billion, showing significant growth. If SoundHound can convert this backlog into revenue, there could be substantial growth ahead. Overall, if investors believe in SoundHound's potential for ongoing rapid growth, the current stock price may be seen as a buying opportunity. However, if growth slows, the stock may face further declines.