Why SoundHound AI's stock price fell 22% last month

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of stocks SoundHound AI (Nasdaq: SOUN) According to data from S&P Global Market Intelligence, the voice-controlled software specialist fell 21.8% in June 2024. While the company didn't announce any bad news last month, investors ignored some favorable developments, sending the stock price lower.

The move still makes sense from some perspective, but the price drop makes the SoundHound AI the one to buy now.

Nvidia's role in the spring stock surge

June's drop is a correction to an earlier surge. NVIDIA (NASDAQ: NVDA) In 2023, Nvidia invested $3.7 million in SoundHound AI for a 0.6% ownership stake in the small artificial intelligence (AI) company. When the investment was made public in February, Nvidia's modest position sent SoundHound AI's stock soaring, rising 66% overnight and tripling in the two weeks that followed. On March 15, one month after the disclosure, SoundHound AI's stock price peaked at $10.25, more than four times its pre-disclosure price of $2.26 per share.

Nvidia made several AI-related investments last year, with SoundHound AI not being its biggest investment, the company also spent $147 million on it. Arm Holdings (Nasdaq: ARM) stock and $76 million Recursion Pharmaceuticals Investment: Arm's market reaction to Nvidia's investment was muted, which is not surprising given the company's massive market cap of $190 billion. But Recursion Pharma's surge was smaller than SoundHound AI's and was short-lived, disappearing entirely by the end of March.

By then, Nvidia had revealed some details about its intentions to invest in SoundHound AI: The two companies had been collaborating on an AI-powered voice control system for the Nvidia Drive self-driving car platform, and the smaller investment was a natural outgrowth of their close business partnership.

In other words, investor enthusiasm for Nvidia has been waning for months now, and June's drop was simply a continuation of that trend.

Recent Accomplishments from SoundHound AI

What about those positive developments mentioned earlier? They're not exactly game-changers, but one move accelerated SoundHound AI's ambitions in the restaurant management industry, and the other two demonstrated fiscal responsibility.

  • The company paid off $100 million in long-term debt in June, leaving its balance sheet debt-free and with $180 million in cash reserves. The paydown was funded by $143 million in new stock sales in the first quarter. SoundHound AI has benefited from a strong stock price.

  • A small number of preferred stock stubs were converted into regular Class A shares. The company no longer had to pay dividends to preferred shareholders, and having a single class of stock made the ownership structure a bit simpler.

  • Finally, SoundHound AI acquired food ordering specialist Allset Technologies for an undisclosed amount. The acquisition adds Allset's 7,000 customer locations and a small team of talented developers to SoundHound AI's customer roster. “This partnership will accelerate our progress towards the next exciting phase of AI-powered ordering convenience,” said Stas Matviyenko, CEO of Allset.

In summary, SoundHound AI's recent share price decline is clearly more of a blip than a setback. The company's strategic vision is poised for significant growth, backed by a large cash reserve of $180 million and a backlog of open orders and long-term subscriptions of $682 million.

With strong fundamentals and a forward-thinking management team, SoundHound AI stands out as a great investment opportunity right now, and the lower share price makes the idea even more attractive.

(Nasdaq: RXRX)

Should you invest $1,000 in SoundHound AI right now?

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Anders Bylund has invested in Nvidia and SoundHound AI. The Motley Fool invests in and recommends Nvidia. The Motley Fool has a disclosure policy.

Why SoundHound AI Stock Dropped 22% Last Month originally appeared on The Motley Fool

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