SoundHound AI Inc (SOUN) shares plummeted 5.12% to $20.43 in Tuesday's pre-market trading session, giving back some of the stock's massive gains this year amid concerns over its lofty valuation and competitive pressures in the AI software space.
SoundHound, which develops voice recognition and generative AI technology, has seen its shares skyrocket in 2024 as investors piled into the AI hype cycle. However, analysts are now questioning whether the rally has gotten ahead of fundamentals, with the company's price-to-sales ratio surging to nearly 100 times, far exceeding the market average.
Additionally, the company faces intensifying competition from tech giants like Microsoft, which could leverage its existing AI capabilities and partnership with OpenAI to encroach on SoundHound's territory. While SoundHound's business model of offering AI voice assistants to restaurants and businesses is compelling, the lack of a strong economic moat raises concerns about its long-term competitive advantages.
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