SoundHound AI Inc stock plummeted 9.55% on Thursday, underperforming the broader market amid concerns over the Federal Reserve's projections and the company's lofty valuation.

The sell-off in AI stocks, including SoundHound, was triggered by the Federal Reserve's updated economic projections on Wednesday. The central bank signaled fewer interest rate cuts and higher inflation for 2025, dampening investor sentiment towards speculative and growth-oriented stocks.

Additionally, SoundHound's surge in valuation this year, with the company now commanding a market capitalization of around $8 billion, has raised eyebrows among analysts. Some experts have expressed concerns about the company's ability to maintain its lead in the voice AI market and sustain its growth momentum, particularly in the face of stiff competition from industry giants like NVIDIA.

While SoundHound has established itself as an early mover in the voice AI space, securing partnerships with automakers and restaurants, questions remain about its profitability and long-term growth prospects. Analysts have highlighted the company's lack of substantial research and development budget compared to its larger rivals, which could hinder its ability to stay ahead of the competition in the rapidly evolving AI landscape.