Motley Fool: SoundHound AI stock too rich after meme rally, despite long-term promise

Investors are overly optimistic about the prospects of voice AI developer SoundHound AI, argues the Motley Fool contributor Anders Bylund. The company’s stock jumped nearly 24% in September, but for “all the wrong reasons,” he wrote, with the rally driven more by social media chatter than by actual company news.

Shares of SoundHound AI, which develops conversational AI solutions for the automotive, restaurant, and enterprise markets, rose 23.5% in September. However, Bylund argues that the gains had little to do with the company’s business fundamentals. Instead, the volatility was fueled by online discussions, disconnected from broader market trends or SoundHound’s own announcements.

He cited three press releases in September, only one of which was followed by a positive market reaction. More significant news either went unnoticed or coincided with declines.

"The recent market action is too optimistic," Bylund wrote. "People are jumping to conclusions, long before SoundHound AI gets a chance to prove its actual market value."

Today, October 2, SoundHound AI shares opened more than 5.5% higher after the company announced it had been recognized as a leader in the IDC MarketScape for Worldwide General-Purpose Conversational AI Platforms 2025 Vendor Assessment.

Over the last 12 months, the stock has surged 244%. It now trades at what Bylund called an “nosebleed-inducing valuation” of 50 times trailing sales. In the second quarter, SoundHound AI reported record revenue of $42.7 million, up 217% year over year. Meanwhile, profit-based metrics do not make sense, Bylund argues, as the company is "deeply unprofitable" so far.

Bylund concludes that he is holding on to his existing SoundHound AI shares "for the long haul," refusing to buy any more at these "lofty prices." He recommends checking again when the meme-stock rally fades. "It's too early to ask for stronger sales or positive profit margins," he adds. 

Wall Street analysts are more upbeat. According to MarketWatch, SoundHound AI has seven "buy" recommendations versus three "holds." Still, the average target price of $15.60 per share is below current market quotes.

The AI translation of this story was reviewed by a human editor.