Anders Bylund, The Motley Fool
5 min read
In This Article:
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The company’s stock price surged on Nvidia's investment news in early 2024, but later reversed as the hype faded.
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SoundHound AI became a so-called meme stock last fall, as social media channels attempted to engineer a lucrative short squeeze.
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The stock is still well below its late-2024 peak despite recent gains, and more of a "hold" than a "buy" right now.
Computerized voice control expert SoundHound AI (NASDAQ: SOUN) has been on a wild ride over the last couple of years. Is it still behaving like a meme stock, or is it time to start buying this promising artificial intelligence (AI) developer yet?
This company has been around for decades. The SoundHound app started collecting audio data for AI analysis in 2006 under the name Midomi. The song-recognition engine evolved into a powerful voice recognition system over time, adding language analytics to create a generally useful "speech-to-meaning" tool.
After adding a couple of global car companies to its client list, SoundHound broadened its horizons. The company changed its name to SoundHound AI and went public in the spring of 2022, by way of a special purpose acquisition company (SPAC) merger. The move added $90.7 million to SoundHound AI's balance sheet, preparing the company for a more intense customer search.
The generative AI boom started seven months later. OpenAI released ChatGPT 3.5 in late November 2022, kick-starting a game-changing economic boom. SoundHound AI was too small and obscure to take advantage of this sector-boosting catalyst, and the stock gained 42% over the following year. By contrast, leading AI hardware provider Nvidia (NASDAQ: NVDA) saw share prices soar 194% in the same period.
But that mellow mood was about to change. In early 2024, Nvidia disclosed a small investment in SoundHound AI stock. The stock skyrocketed on the news. SoundHound AI's stock price quadrupled in four short weeks as investors expected Nvidia to either buy the company or announce a deep, lucrative partnership.
The bullish projections never came true, and SoundHound AI's stock chart pointed downward again. But the seed had been sown for an even quicker price spike. SoundHound AI was now popular enough to gain traction on social media channels with market-moving powers.
One such group hoped to create a money-making short squeeze, forcing bearish investors to cover their short positions on the stock. The effort lifted share prices from less than $5 to more than $24 per share, peaking near the holidays.
