Shares of SoundHound AI Inc (SOUN) plummeted nearly 8% in pre-market trading on Monday, as investor concerns mounted over the AI company's lofty valuation and the potential for a bubble in the stock price. The sell-off comes despite SoundHound's strong revenue growth and expanding customer base, which have fueled a massive run-up in the share price over the past two months.

At the heart of the valuation worries is SoundHound's soaring $9 billion market capitalization, which values the company at over 45 times its projected 2025 revenue of around $200 million. While the voice AI specialist has an early technological lead and is rapidly gaining traction, analysts fear the stock's meteoric rise may be driven more by speculation and meme stock trading than fundamentals.

In its latest quarterly report, SoundHound raised its full-year 2024 revenue guidance to $82-85 million and boosted its 2025 forecast to $155-175 million. However, even accounting for this increased outlook, the company's current valuation implies extremely high growth expectations for many years to come. There are also concerns that the rapid share price increase may be partially fueled by short-covering activity, as SoundHound had a short interest of over 22% at the end of November.

While SoundHound appears to have carved out a compelling position in voice AI - particularly in verticals like automotive and quick service restaurants - the stock's dizzying valuation leaves little room for error or unexpected competition from tech giants. Unless the company can sustain its breakneck growth pace for an extended period, the current share price may prove unsustainable over the long term.