Shares of SoundHound AI (NASDAQ: SOUN) slipped 50% in 2025, according to data from S&P Global Market Intelligence<\/a>. A developer of voice-based artificial intelligence (AI<\/a>) tools for businesses, the company is winning tons of contracts and driving strong revenue growth. However, the business is burning a lot of cash and trades at a premium valuation.<\/p>\n Here’s why SoundHound AI stock fell in 2025, and whether you should scoop up some shares at these discounted prices.<\/p>\n SoundHound AI has adeptly expanded its voice-based AI technology during the past few years of the AI revolution. It offers products to support customer service, restaurant drive-thrus, car voice systems, and more, winning numerous contracts worldwide across various industries. Its focus on commercial use cases has helped it win contracts when competing with big technology companies.<\/p>\n Revenue is exploding higher. Sales increased 68% year-over-year to $42 million last quarter. Since going public in 2022, revenue has grown cumulatively by over 1,000%.<\/p>\n So why is the stock down? The primary reason is the company’s inability to generate a profit while heavily diluting its shareholders. SoundHound AI’s free cash flow<\/a> was negative $111 million over the last twelve months, a figure that has only gotten worse since it became public. On top of this cash drain, the company has a large stock-based compensation program that is diluting shareholders but is not included in cash flow. Shares outstanding are up over 100% since the company went public, which will be a huge drag on long-term returns.<\/p>\n Even though SoundHound AI’s stock collapsed last year, it still trades at a premium price relative to its trailing revenue. With a market capitalization of $5 billion, the stock has a price-to-sales ratio (P\/S) of 32, which is more than 10 times the average of the S&P 500 Index.<\/p>\n A bull may argue that SoundHound AI is growing quickly, which will bring down this P\/S ratio. Investors need to remember, though, that this company is failing to generate positive free cash flow and is heavily diluting shareholders with stock-based compensation. Combine this with a high starting valuation, and SoundHound AI stock does not look attractive even after falling 50% in 2025.<\/p>\n Before you buy stock in SoundHound AI, consider this:<\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a010 best stocks<\/a> for investors to buy now\u2026 and SoundHound AI wasn\u2019t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.<\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you\u2019d have $482,326!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you\u2019d have $1,133,015!*<\/p>\n Now, it\u2019s worth noting\u00a0Stock Advisor\u2019s total average return is 968% \u2014 a market-crushing outperformance compared to 197% for the S&P 500.\u00a0Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built by individual investors for individual investors.<\/p>\n See the 10 stocks \u00bb<\/a><\/p>\n *Stock Advisor returns as of January 10, 2026. <\/p>\n Brett Schafer<\/a> has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends SoundHound AI. The Motley Fool has a disclosure policy<\/a>.<\/p>\n Image source: Getty Images. <\/p>\n