It's been a very volatile year for artificial intelligence (AI) specialists. Soundhound AI (NASDAQ: SOUN). In mid-February, investors learned that the chipmaker was: Nvidia owned stock in the company. The investment was modest at 1.73 million shares, now worth $6.6 million, but the stock price soared, reaching 320% year-to-date through March 15.
But since then, three stocks have weighed on the stock, sending SoundHound AI down nearly 57% from its highs.
1. Foam evaluation
At its peak, SoundHound AI stock was selling for about 45 times sales, a valuation that would be frothy under most circumstances. Although the company has achieved impressive revenue growth (2023 sales increased by his 47%), SoundHound AI has not yet generated a profit. The company has made progress in this regard, cutting losses by almost half.
Still, many investors saw an opportunity to book profits after the stock quadrupled in less than three months.
2. Investors have lost confidence.
Two catalysts within 24 hours of each other left SoundHound investors horrified.
The first was a short report by Capybara Research titled “Lies, Terrible Lies, and Cheeseburger 'AI'.” The report asserts, inter alia:
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SoundHound misled investors that the quality of its AI was substandard.
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The company is hiding the fact that it has lost some of its biggest customers.
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Soundhound acknowledged “material weaknesses in its internal controls over financial reporting,” which in accounting terms represents sloppy underlying financials.
The day after the short report surfaced, Cantor Fitzgerald analysts upgraded Soundhound's rating from overweight (buy) to underweight (sell), citing some of the same issues raised in the short report. Double pulled down.
This one-two punch caused some investors to flee.
3. New funding
Earlier this month, SoundHound announced it would sell $150 million worth of stock. The sale of shares in the market will dilute existing shareholders by approximately 10%. SoundHound ended 2023 with just $95 million in cash left after he burned through $148 million in his two years prior.
At 19x sales, the valuation is more reasonable, but SoundHound AI still outperforms. dangerThere is a stock.
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Danny Vena holds a position at Nvidia. The Motley Fool has a position in and recommends Nvidia. The Motley Fool has a disclosure policy.
Why is SoundHound AI stock falling? Originally published by The Motley Fool
