SoundHound AI Plummeted Today -- Is Now the Time to Buy the Stock?

SoundHound AI (NASDAQ: SOUN) stock saw a big valuation retreat Monday. The company's share price sank 8.5% in a daily trading session that saw the S&P 500 (SNPINDEX: ^GSPC) fall 0.5% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) decline 1.2%. The conversational artificial intelligence (AI) specialist's stock had been off as much as 11.9% earlier in the session.

AI stocks with growth-dependent valuations got hit hard in Monday's trading as investors moved to reduce their exposure in case Nvidia reports disappointing fourth-quarter results on Wednesday. SoundHound AI's valuation was also pushed after reports suggesting Microsoft won't be moving ahead with some of its data center expansion plans raised concerns about the broader growth outlook for AI plays.

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SoundHound has been volatile

SoundHound AI has been highly volatile over the last year. While the company's share price is still up roughly 141% over the last 12 months, the stock has fallen roughly 52.5% across 2025's trading. Given the market-shaping potential of Nvidia's upcoming Q4 report on Wednesday and the arrival of SoundHound's own Q4 report the next day, shares are seemingly poised for more big moves this week.

With a market capitalization of roughly $3.7 billion, SoundHound AI is now trading at approximately 22.4 times this year's expected sales. That's still a heavily growth-dependent valuation that opens the door for big downside risk, but recent sell-offs for the stock have pushed the company's shares down to levels that look more reasonable in the context of the company's growth trajectory.

With its last quarterly report, SoundHound raised its full-year sales target for 2024 to between $82 million and $85 million. At the midpoint of the guidance range, that would mean year-over-year sales growth of approximately 82%. The company also said it anticipates revenue for 2025 will be between $155 million and $175 million, which suggests revenue could more than double this year.

Is SoundHound AI stock a buy right now?

Even on the heels of big sell-offs, SoundHound AI stock probably isn't a good portfolio fit for risk-averse investors. But for investors with high risk tolerance and a positive outlook on the business's expansion potential, the recent valuation pullback could present a worthwhile entry point.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.