This Magnificent Artificial Intelligence (AI) Stock Is Down 50%. Buy the Dip, or Run for the Hills?
SoundHound shares have dropped more than 50% from their highs.
The company is working to combine its AI voice technology with AI agents.
If the company can become a leader in the agentic AI space, it could have huge upside.
10 stocks we like better than SoundHound AI ›
SoundHound AI (NASDAQ: SOUN) exploded onto investors' radars when Nvidia disclosed a stake last year. The stock took off as enthusiasm soared, but has cooled off since. Shares are now down more than 50% from their highs.
The question is whether that drop is a red flag or a buying opportunity.
Looking to combine voice and agentic AI
SoundHound started out as an artificial intelligence (AI) voice company whose platform goes beyond traditional speech recognition. Its "speech-to-meaning" and "deep meaning understanding" technology are designed to not just convert words into text, but to interpret what someone actually wants in real time before they are even finished speaking.
SoundHound has established a strong foothold in the automobile and restaurant industries. Major automakers, such as Hyundai and Stellantis, use its platform to power voice assistants in their vehicles, while fast-food chains are embedding its technology into drive-thrus, phone orders, and kiosks. The company is seeing strong traction in these industries, but that's part of the story.
The other part is what came with the company's $80 million acquisition of Amelia in 2024. Amelia specialized in virtual agents for industries like healthcare, insurance, and financial services. These are consumer-facing industries where compliance, transactional complexity, and industry-specific jargon make voice integration more difficult.
SoundHound bought Amelia not only to gain customers in these verticals, but to also gain access to its technology. In essence, it allowed the company to combine its advanced speech recognition technology with Amelia's conversational intelligence.
Amelia also gave SoundHound an important missing piece to go beyond voice and enter the world of agentic AI. SoundHound isn't looking to be just an AI voice company anymore, it's positioning itself as an autonomous voice agent technology company.
Its launch of its Amelia 7.0 platform is a big step forward in this vision. The platform is designed to act like a digital employee that can understand intent, reason, interact with humans naturally, and then autonomously complete tasks. While chatbots may struggle with interruptions or someone rephrasing something, Amelia 7.0's voice first technology helps it excels in these areas.
Amelia can also be integrated with enterprise systems, such as enterprise resource planning (ERP) platforms, customer relationship management (CRM) platforms, help desks, banking systems, and medical and insurance platforms. It can also carry out very industry specific tasks.
For example, within healthcare, it can help a patient who calls a medical practice find the right specialist, schedule an appointment, get prior authorization, and take their insurance information. Meanwhile, for financial services, it would be able to handle tasks such as balance transfers, transaction disputes, or even make complex stock and options trades.
That type of voice AI platform can be real cost saver for companies, so it has a huge opportunity in front of it. However, it also has real work to do.
All about execution
While SoundHound just posted 151% revenue growth in Q1, it's still not profitable and its gross margin has come under pressure. The Amelia deal brought over some lower-margin legacy contracts, and amortization costs from the acquisition are also weighing on reported results. Last quarter, generally accepted accounting principles (GAAP) gross margin dropped to 36.5%, although adjusted gross margin was higher at 50.8%.
SoundHound is aiming to get gross margin back above 70% over time. It last hit that level in the fourth quarter of 2023, before the Amelia deal closed. Management has been clear that improving its margin profile is a key focus, and as low-margin contracts expire and get renegotiated, those numbers should improve.
The path from here is all about execution. SoundHound has an intriguing technology and a differentiated product. However, it faces competition from bigger companies that have more resources and large installed user bases.
The pullback in the stock has more to do with sentiment and valuation than it does with its growth outlook. The stock has never been cheap, and it likely won't be anytime soon. But that's the case with most companies with huge future opportunities.
If SoundHound succeeds in becoming a premier agentic AI company, the drop in share price will look like a gift. However, if it stumbles on execution or gets outflanked by a bigger player, it won't matter how strong its tech is.
The simple fact also is that the best technology doesn't always win. Sony is a company that knows this very well. Its superior Betamax technology lost to VHS in the early days of VCRs. However, the company learned its lesson when DVDs came around, with its Blu-ray technology being the winner over HD DVD, despite arguably being the lesser technology. Time will tell who comes out on top with AI agents.
Is SoundHound stock a buy?
SoundHound is at the intersection of voice AI and AI agents, which has the potential to be an absolutely huge market. Meanwhile, with a market cap of less than $5 billion, the stock has a lot of runway if it can become one of the major players in this market.
Overall, an investment in SoundHound stock is a high-upside bet on a potentially big trend. For long-term investors who can handle volatility, buying this dip could be a great opportunity. Just remember, though, this is still a high risk-reward stock.
Should you invest $1,000 in SoundHound AI right now?
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As the creator of the most advanced graphics processing units (GPUs) that top companies use to power their AI platforms, Nvidia has grown to be the most valuable publicly traded company in the world and was the first to crack the $4 trillion milestone. Nvidia's GPUs can be combined with other chips into clusters that can work faster and more powerfully, which is why they are so prized by companies building AI applications. Jon Peddie Research estimates that Nvidia has a staggering 92% of the GPU market. The company will report earnings for its second quarter of fiscal 2026 on Aug. 27, and analysts are expecting another blowout quarter. Of 66 analysts who cover Nvidia on Yahoo! Finance, 59 of them rank Nvidia as a buy or strong buy. Alphabet Alphabet already reported its quarterly earnings, and Wall Street was impressed. Revenue in Q2 was up 14% to 96.4 billion, while net income was up 19% to $28.19 billion. Alphabet's earnings per share also jumped to $2.31, a 22% gain from a year ago. The report was a welcome return to form for Alphabet, which has struggled so far in 2025 amid concerns that platforms such as ChatGPT would eat into the company's massive Google search business. There are also legal issues, as Alphabet is battling with the Justice Department over allegations that it has an illegal monopoly, and there are concerns that the company could be split up. But Alphabet has been able to put those concerns to rest, at least for now. Revenue from Google Cloud was particularly strong in the second quarter, rising 32% to $13.6 billion, as the company's Google AI platform is incorporated into its Chrome browser and Google search engine. Alphabet also saw strong growth in Google Search (revenue was up 11.7%) and Google Advertising (up 10.4%). Alphabet's stock also trades at a low 20.6 price-to-earnings ratio --incredibly attractive for a tech stock that continues to show strong growth. Taiwan Semiconductor Manufacturing This one goes hand-in-hand with Nvidia, really. If you believe in the growth story powering Nvidia's GPUs, then Taiwan Semiconductor, also known as TSMC, has the same kind of tailwinds. TSMC is a fabricator of GPUs -- it doesn't design them, but it is one of the biggest companies in the world that actually makes them for Nvidia and others. It's a rapidly growing field, as Mordor Intelligence says the GPU market will be $82.7 billion this year and explode to $352.5 billion by 2030. TSMC has an estimated 62% market share of the global foundry market, so it's going to benefit no matter which company has the lead in the GPU race over the next decade. Nvidia's major competitor, Advanced Micro Devices, is also a TSMC customer. TSMC is also growing its footprint in the U.S. rapidly, with plans to invest $165 billion in facilities in Arizona that should shield it from any tariff concerns in the future. TSMC's Q2 earnings included revenue of $30.07 billion, up 44.4% from a year ago. The company is projecting Q3 revenue even higher, to be between $31.8 billion and $33 billion. The bottom line Each of these companies is at the forefront of the explosive growth in AI, which is the dominant trend driving the stock market today. All of them would be excellent buys in August to capitalize on the market-driving power of tech stocks. Where to invest $1,000 right now When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor's total average return is 1,026%* — a market-crushing outperformance compared to 180% for the S&P 500. They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor. See the stocks » *Stock Advisor returns as of August 4, 2025
