Shares of SoundHound AI Inc. (SOUN) experienced a significant decline after Nvidia Corp. (NVDA) disclosed the sale of its entire stake in the voice AI company. This move has raised questions about SoundHound’s future prospects and the rationale behind Nvidia’s decision.

Nvidia’s Divestment Details

In its latest 13F filing, Nvidia revealed the complete divestiture of its holdings in SoundHound AI, Serve Robotics, and Nano-X Imaging during the fourth quarter of 2024. Concurrently, Nvidia reduced its position in Arm Holdings by approximately 44%, retaining 1.1 million shares. These strategic shifts were accompanied by new investments, including 1.7 million shares in Chinese self-driving startup WeRide Inc. and 1.2 million shares in AI cloud firm Nebius Group.

Market Reactions

Following Nvidia’s announcement, SoundHound AI’s stock plummeted by 27%, reflecting investor concerns over the company’s future without Nvidia’s backing. In contrast, Nvidia’s shares experienced a modest increase of 1.9%, suggesting that investors view these portfolio adjustments favorably.

SoundHound’s Investment Fundamentals

Despite the recent sell-off, SoundHound AI has demonstrated robust growth. In 2023, the company reported a 47.36% increase in revenue, totaling $45.87 million, though it still faced losses of $91.71 million. Analysts maintain a “Buy” rating for SOUN stock, with a 12-month price target of $13.25, suggesting a potential upside of approximately 20.84% from the current price.

Bullish Perspective

Proponents highlight SoundHound’s innovative voice AI technology and its expanding presence in sectors like hospitality and automotive. The company’s solutions are integrated into over 10,000 restaurants, including major chains like Chipotle and Applebee’s. Analysts have raised price targets, with some projecting values as high as $22, indicating confidence in SoundHound’s market position and growth trajectory.

Bearish Perspective

Critics point to the company’s ongoing financial losses and the potential implications of Nvidia’s divestment as indicators of underlying challenges. The recent stock volatility underscores concerns about SoundHound’s ability to achieve sustainable profitability in a competitive AI landscape.

Looking Ahead

SoundHound AI is scheduled to report its fourth-quarter and full-year financial results on February 27, 2025. This upcoming disclosure will provide deeper insights into the company’s financial health and operational performance, offering investors a clearer picture of its future prospects

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