Why SoundHound AI May Not Deserve Your Investment Portfolio

When evaluating emerging technology stocks like SoundHound AI, savvy investors need to look beyond the surface appeal. While the company’s voice-driven artificial intelligence services represent genuine innovation, there are several compelling reasons why cautious investors should approach SoundHound AI with extreme skepticism rather than enthusiasm.

The core challenge isn’t about dividend yields or personal investment preferences—though those matter. Instead, it’s about applying sound investment principles to an inherently risky asset class. Let’s examine why SoundHound AI fails multiple critical tests that most conservative portfolios require.

The Fundamental Problem: No Path to Profitability

Profitability remains the cornerstone of sustainable investing. Consider established technology firms like International Business Machines and Texas Instruments, both of which I hold in my portfolio. What distinguishes these companies isn’t just their dividend histories—it’s their demonstrated ability to generate consistent earnings.

SoundHound AI operates in a completely different league. The company remains unprofitable, with no clear timeline for reaching profitability. This is particularly concerning given the intensifying capital competition unfolding across the artificial intelligence sector. Every major technology player is aggressively investing to develop competitive AI capabilities, meaning SoundHound must continuously burn cash just to remain relevant.

The AI Bubble Risk: Not Every Bet Pays Off

The investment community has developed an almost fever-pitched enthusiasm around artificial intelligence. This emotional fervor, while understandable, has historically led investors astray. During the dot-com era, countless startups promised revolutionary technology, yet only a handful survived to deliver real value.

The Netflix story illustrates this perfectly: investors who backed the streaming company when it appeared on analyst recommendations in December 2004 saw their $1,000 investment grow to $464,439. Similarly, those who invested $1,000 in Nvidia in April 2005 watched it balloon to $1,150,455. But for every Netflix and Nvidia, there were dozens of forgotten names that evaporated.

With SoundHound AI, we simply cannot know whether its voice technology will ultimately dominate or become obsolete as competitors introduce superior solutions. The competitive landscape is too crowded and unpredictable.

Volatility: A Red Flag for Risk Management

Perhaps the most telling indicator is the stock price behavior. Over the past year, SoundHound AI has lost 50% of its value twice—a pattern that reflects the underlying instability of early-stage tech ventures. While aggressive traders might view this volatility as opportunity, most investors find such roller-coaster movements psychologically and financially unbearable.

This price action isn’t coincidental. It reflects legitimate uncertainty about whether the company will survive long enough to capitalize on its technology.

A Smarter Approach to AI Exposure

If you’re genuinely interested in capturing potential gains from artificial intelligence, consider whether direct exposure to single high-risk companies makes sense. Alternatively, artificial intelligence-focused exchange-traded funds (ETFs) offer a more prudent approach by diversifying your bet across multiple AI plays, reducing the catastrophic risk of backing the wrong horse.

The Motley Fool’s analyst team has identified what they believe are superior investment opportunities—carefully vetted positions that have historically outperformed the broader market by significant margins. Stock Advisor’s average return stands at 949% compared to just 195% for the S&P 500, a distinction that underscores the value of rigorous stock selection.

Before committing capital to SoundHound AI, ask yourself whether you’d be comfortable holding a stock that could easily decline 50% again next year. For most investors, the honest answer should be no.