SoundHound AI sinks 28% in a day—Here's what triggered the drop

Core Viewpoint - SoundHound AI experienced a significant decline in stock price following Nvidia's complete divestment from the company, raising concerns about its future growth trajectory and investor sentiment [1][3]. Group 1: Stock Performance and Market Reaction - On February 14, 2025, SoundHound AI's stock fell by 28.1%, closing at $10.97 after Nvidia announced it had fully exited its stake in the company [1]. - Nvidia's previous stake of 1.71 million shares was valued at approximately$33.57 million at the end of 2024, based on a closing price of $19.43 on December 31 [3]. - The divestment from SoundHound AI, although small relative to Nvidia's$3.36 trillion market cap, sent a negative signal to the market, exacerbating concerns about SoundHound AI's growth [3]. Group 2: Nvidia's Investment Strategy - Nvidia's exit from SoundHound AI was part of a broader portfolio reshuffle, which included a 43.83% reduction in its stake in Arm Holdings and sales of shares in Serve Robotics and Nano X Imaging [4]. - New investments were made by Nvidia in WeRide Inc., a self-driving technology company, and Nebius Group N.V., an AI cloud computing firm [4]. Group 3: Future Outlook for SoundHound AI - Despite the stock decline, SoundHound AI trades at 26.8 times its projected sales for the year, indicating vulnerability to further market volatility [5]. - The company has demonstrated strong revenue growth and maintains a presence in the expanding voice AI market, particularly in healthcare, automotive, and smart devices [6]. - Analysts, including Wedbush's Daniel Ives, remain optimistic about SoundHound AI's long-term potential in the AI sector, labeling it a 'long-term winner in the AI revolution' [6].