One Hypergrowth Tech Stock to Watch in 2025

Right now, some high-flying tech stocks might seem enticing, but one in particular, SoundHound AI (SOUN 8.60%), is not a good buy at the moment. However, it is worth keeping an eye on for potential opportunities in 2025.

The current market situation suggests that the company’s stock price may need to experience a correction before it becomes a sound investment. This recent rapid rise in stock value should cool off in the coming months, while the long-term potential of the company remains strong.

Promising Prospects for SoundHound AI

SoundHound AI is positioned for significant growth in the coming years. With the increasing prevalence of voice-controlled technology across various sectors, such as drive-through services and in-car infotainment systems, the company stands out even among larger tech giants like Apple and Amazon, who have their own voice recognition products.

Despite the competition, SoundHound AI has secured long-term contracts with notable automakers and fast-food chains, which points to its rising demand. Recent innovations, like the integration of their technologies to enable ordering directly from car stereo systems, further illustrate the company's commitment to growth and innovation.

Current Valuation Concerns

However, even with these positive developments, buying shares of SoundHound AI at this time is not advisable. In fact, I sold a portion of my holdings recently, capitalizing on a surge in stock prices largely driven by speculative interest.

The company gained attention in various online trading groups, which contributed to its rapid price escalation. This uptick appears to have peaked around the holiday season, leading to a current valuation that is roughly 47% lower than its prior high.

While I have confidence in SoundHound AI's long-term growth, the stock recently traded at a Price-to-Sales (P/S) ratio of 110.5. This ratio has since decreased to around 73, but that figure is still high, suggesting that there is limited value at the current stock price.

What to Watch For

I plan to keep a close watch on SoundHound AI and consider reinvesting if the stock price falls to the $6-$7 range. The anticipated fading of speculative trading activity in the upcoming months could bring the stock price down, offering a better entry point for long-term investment.

Notably, the company reported strong revenue growth and reduced net losses in its latest quarterly results, and it provided ambitious guidance for revenues in the next two years, which certainly adds to the excitement for future growth.

With careful monitoring, I am ready to buy back shares if the price rebounces clearly from this temporary downturn.

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