Why SoundHound AI Stock Lost 22% Last Month

Shares of SoundHound AI (NASDAQ: SOUN) fell 21.8% in June 2024, according to data from S&P Global Market Intelligence . The voice control software specialist had no bad news to share last month, but investors shrugged off a handful of positive developments to drive the stock price lower anyway.

The move still makes sense from a certain point of view. In my eyes, however, the price drop makes SoundHound AI a no-brainer buy right now.

Nvidia's role in the spring's stock surge

The June slide is a correction to an earlier jump. Semiconductor designer Nvidia (NASDAQ: NVDA) invested $3.7 million in SoundHound AI in 2023, building a 0.6% ownership stake in the smaller artificial intelligence (AI) company. When this investment was disclosed in February, Nvidia's modest position drove SoundHound AI's stock price sharply higher. The stock gained 66% overnight and tripled in price over the next two weeks. On March 15, one month after the disclosure, SoundHound AI's share price peaked at $10.25 -- more than four times the pre-disclosure level on $2.26 per share.

Nvidia made several AI-oriented investments last year, and SoundHound AI was far from the largest one. The company also committed $147 million to Arm Holdings (NASDAQ: ARM) stock and $76 million to a Recursion Pharmaceuticals investment. Arm's muted market response to Nvidia's investment makes sense, since the company comes with a massive $190 billion market cap. But Recursion Pharma's jump was also smaller and more short-lived than SoundHound AI's, fading out entirely by the end of March.

By then, Nvidia had shared some details about its intentions with the SoundHound AI investment . The two companies are working together on AI-driven voice control systems for the Nvidia Drive self-driving vehicle platform, and this small investment followed naturally from a tight operating partnership.

So the investor enthusiasm about that Nvidia investment has been fading for months, and the June drop simply continued that trend.

SoundHound AI's recent achievements

What about the positive developments I mentioned earlier? They weren't exactly game-changers, but one move accelerated SoundHound AI's ambitions in the restaurant management industry and the other two showed a sense of fiscal responsibility.

• The company paid off $100 million of long-term debt in June , leaving the balance sheet debt-free with $180 million in cash reserves. This payoff was financed by $143 million in new stock sales during the first quarter -- SoundHound AI took advantage of a soaring stock price.
• A small number of preferred stock stubs were converted into ordinary Class A shares. The company no longer needs to pay dividends to its preferred shareholders and the ownership structure is a little bit simpler with a single class of shares.
• Finally, SoundHound AI acquired food ordering specialist Allset Technologies for an undisclosed amount. The deal adds Allset's 7,000 customer locations to SoundHound AI's client roster, along with a small team of talented developers. "This team-up will accelerate our progress toward the next exciting phase of AI-powered ordering convenience," Allset CEO Stas Matviyenko said.

Wrapping up, SoundHound AI's recent stock slide is clearly more of a hiccup than a setback. The company's strategic vision, supported by a hefty $180 million cash reserve and an impressive $682 million backlog of unfilled orders and long-term subscriptions , positions it for significant growth.

With such strong fundamentals and a forward-thinking management team, SoundHound AI stands out as an excellent investment opportunity right now. The lower share price only makes this idea more compelling .

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Anders Bylund has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy .