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Why SoundHound AI’s Setback Could Be a Buying Opportunity

The price action in SoundHound AI (NASDAQ: SOUN) is down 35% YTD in 2025 and may fall further, but this isn’t a stock to sell too quickly. The price action is driven by uncertainty and high short interest that fails to account for its position in AI. SoundHound has emerged as the leader in voice-assisted operations for industries like restaurants and expanding into new verticals that will sustain growth and cash flow long into the future. The stock price is down by 30% now, but it will rebound and set new highs, possibly this year.

The outlook for voice-assisted AI is very bright. The growth will be driven by accelerating adoption across sectors due to improving availability as it embeds into daily life. The industry is forecasted to grow at a high double-digit CAGR over the next decade because of the triple tailwinds of increased capability, availability, and deepening service penetration. Eventually, voice assistants will be integrated into comprehensive smart-home solutions, bringing humanity into a new age. Estimates vary, but a mid-20% to mid-30% CAGR is expected through the end of this decade and into the next. Aside from the apparent benefits, users will enjoy enhanced biometric security muti-modal interfaces. 

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SoundHound Analysts Grow Bullish on Long-Term Opportunity

The analysts' outlook for 2025 is robust and likely cautious due to the momentum they cite. Takeaways from the chatter include confidence in the company’s ability to execute, including recent acquisitions, leveraging its partnership with NVIDIA, and expanding into eCommerce this year.

Technological advancements and the company’s rare position as an AI pure-play are also noted. The valuation is a concern but not a deal-breaker when compared to the growth outlook. According to analysts at Weebler Finance, based on the prospects for disruption, the stock is priced for substantial growth.

Wedbush analyst Dan Ives made a game-changing price target increase in December, compounded by a similar increase by H.C. Wainright. They put the stock in the $22 to $26 range, giving an average of about double the consensus in mid-January. The consensus reported by MarketBeat lags the price action at that time but is rising quickly, up 200% in 12 months, 45% since early Q4 2024, and 30% from December to January, providing a lift for the market. The price action may return to test the consensus level for support but will likely rebound strongly before the year’s end. 

Insiders Sell Into the SoundHound Rally, Cap Gains

Insiders aided the sell-off in SoundHound stock. Insider selling surged to a post-IPO high in December 2024. However, the company uses share-based compensation, the sales align with it, and insiders still own a significant amount of stock. Sales were made by the CEO, COO, CTO, CPO, CFO, and two directors in small amounts and nearly 20 transactions. Regarding ownership, insiders still have considerable skin in the game at over 12% of the stock. 

Institutional activity more than offsets the insider selling and aligns with the forecast for higher share prices. The group owns a small 20% of the stock but has bought on balance every quarter since the SPAC merger, including the first weeks of 2025. Buyers in 2025 are primarily smaller wealth managers and financial advisors. Still, holders include larger financial institutions like State Street Corp and Charles Schwab, which own significant positions worth 2% and 0.7% of the stock. 

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The Technical Outlook: SoundHound to Move Lower Before It Moves Higher

As bullish as the outlook is for SoundHound’s business, the stock price is indicated lower. The market fell beneath a critical support target in the first week of 2025 trading and is showing resistance at that level later in the month. The resistance target aligns with previous price action and moving averages that are pointing lower. The market could move as low as the $9.25 level but is unlikely to fall that far. The critical support target is near the recent low, aligned with the analyst’s consensus, and potentially a strong trigger point for buyers. 

Written by Thomas Hughes

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