SoundHound’s top-line growth is booming, but much of that can be credited to recent acquisitions.
The voice and speech AI specialist looks likely to continue to struggle to generate consistent profits.
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A good rule of thumb is to avoid bullish stocks that have risen substantially without a corresponding improvement in fundamental such as profitability or liquidity. SoundHound AI(NASDAQ:SOUND) is an excellent example of this concept. Shares are down about 46% in 2025, giving back most of the gains experienced during its 2024 rally.
As the AI boom grows long in the tooth, investors are no longer satisfied with companies selling a story about how they plan to use the new technology; they want to see the results. Let’s dig deeper to see if SoundHound can deliver what the market wants in 2026 and beyond.
SoundHound stock became a household name in 2024 when a regulatory filing revealed this Nvidia owned 1.7 million shares in the specialist AI voice and speech. Many investors took the investment as a vote of confidence in SoundHound and a sign that there was something special about its technology. Perhaps more importantly, it opened up the possibility that Nvidia could consider acquiring SoundHound outright as subsidiary or work with it through significant business partnerships.
To be fair, there seems to be some limited cooperation between the two companies. In March 2024, SoundHound announced voice-on-chip AI in collaboration with Nvidia Drive, the company’s hardware and software platform for autonomous vehicles. The product is unique because it is designed to host a fully functional great language model (LLM) on the chip itself instead of relying on cloud-based remote inference.
That said, this does not appear to be a formal partnership or joint venture. Nvidia is a big player in the AI industry; these types of small-scale collaborations are common and not necessarily a game changer. By the end of 2024, updated filings reveal that Nvidia sold its entire stake in SoundHound, leading to a slide from which the stock has not yet recovered.
SoundHound’s roller-coaster ride highlights the danger of investing in a company based on hype and positive news stories. While these events may seem like a big deal in the short term, stock price appreciation usually does not last unless it is supported by improving fundamentals. SoundHound’s third-quarter earnings paint a mixed picture.
While income jumped an impressive 68% year over year to $42 million, investors shouldn’t necessarily take this growth at face value. SoundHound has been on acquisition binge over the past few years, rolling up companies like food ordering company Allset and Enterprise AI company Amelia. These purchases boost revenue growth in the short term, but are not necessarily organic. Overreliance on acquisitions can actually hurt a company’s long-term performance by draining its cash and increasing its losses if new businesses are unprofitable.
SoundHound’s third-quarter operating loss soared more than 240% to an eye-popping $115.9 million. This is far greater than revenue, and it’s safe to say that the company has no clear path to profitability, especially if it continues to drive growth through acquisitions.
Image source: Getty Images.
Despite the extremely weak fundamentals, SoundHound offers some things for investors to be excited about today. For starters, voice and speech AI is arguably the low-hanging fruit of the generative AI opportunity – expect adoption to be rapid in areas such as restaurants, customer service and car assistants.
SoundHound is an early leader, which can help it secure market share and brand recognition. The company already boasts a large number of partnerships with mainstream companies such as Krispy Kreme, Stellarand Mercedes.
All that said, numbers often speak louder than words in the stock market. And investors may want to wait on the sidelines until SoundHound’s losses begin to moderate and show a compelling path to profitability. Shares should be avoided for now.
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and SoundHound AI. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
Is SoundHound Stock a Buy in 2026? was originally published by The Motley Fool
