What Happened?
Shares of voice AI technology company SoundHound AI (NASDAQ: SOUN) jumped 7.5% in the afternoon session after the company agreed to acquire Interactions Corporation, an AI-driven customer service firm, in a deal valued at up to $85 million.
This move was aimed at broadening SoundHound's enterprise offerings and adding a diverse client base. The positive momentum was also fueled by a broader rally in the tech sector, after Nvidia announced a major partnership with OpenAI to build out data centers, boosting sentiment across AI-related stocks. Investor optimism was further supported by SoundHound's strong performance metrics. The company's revenue had surged 217% year over year in the second quarter, and its billings, a key indicator of customer demand, showed an average year-on-year growth of 202% over the last four quarters. This combination of strategic expansion and powerful underlying growth metrics painted a bullish picture for investors.
The shares closed the day at $17.29, up 6.3% from previous close.
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What Is The Market Telling Us
SoundHound AI’s shares are extremely volatile and have had 92 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 4% on the news that investors scooped up equities, shaking off the initial concerns inferred from the Fed's dot plot, with tech stocks leading the charge.
As a reminder, the Federal Reserve cut its benchmark interest rate by 25 basis points yesterday and signaled that more reductions could come before year-end and beyond. Initially when the cut was announced and Fed Chair Powell held his press conference, there was a pullback in the market as the Fed's "dot plot" revealed that only one cut was likely for 2026. This was below the three cuts that had been priced into the markets. This was the first interest rate cut of 2025, a move investors had widely anticipated. In response to the decision, stocks rose significantly, positioning major indexes like the S&P 500 and Nasdaq to open at record levels.
The Fed's decision was influenced by signs of a weakening labor market. Lower interest rates are generally seen as positive for stocks because they reduce borrowing costs for businesses and make fixed-income investments like bonds less attractive by comparison, driving capital into the equity market. While Fed Chair Powell noted the path forward has risks, the prospect of looser monetary policy has fueled optimism on Wall Street.
SoundHound AI is down 14.5% since the beginning of the year, and at $17.23 per share, it is trading 28.9% below its 52-week high of $24.23 from December 2024. Investors who bought $1,000 worth of SoundHound AI’s shares at the IPO in April 2022 would now be looking at an investment worth $2,297.
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