Are Short Sellers About To Get Burned By SoundHound (Nasdaq: SOUN) Stock?

Shares of conversational AI firm SoundHound (NASDAQ:SOUN) have been crushed amid the tech sector’s painful rolling over since Trump unveiled his broad Liberation Day tariffs.

Of course, SoundHound shares were on the retreat well before Trump tariffs became the talk of the town. With SOUN stock now down around 66% from its December all-time high, the shorts have made a great deal from the once-hyped AI up-and-comer’s descent. However, moving forward, the stakes have been raised, and it could prove dangerous to bet against the AI innovator as the Trump tariff trade takes center stage.

Given all it could take are a few simple words from Trump to spark a historic melt-up, I wouldn’t dare bet against any firm at this juncture, no matter how dire the financial situation is or the year-ahead prospects.

After a 66% drop, shorting SoundHound looks to be a dangerously risky proposition.

For a still-promising voice AI company like SoundHound, which is still capable of explosive bursts of revenue growth as it continues winning new contracts while expanding the capabilities of its core offerings (think Houndify and industry-specific conversational bots) in the early innings of the era of AI agents, I think there’s a high chance the shorts could be squeezed out of a position as we progress through the year.

Indeed, the stock has already cratered, shedding two-thirds of its value in a matter of a few short months. And given the potential for SoundHound’s growth ceiling to rise, as advancements in conversational AI pave the way for new use cases, it’s tough to tell just how violent the next upward spike in SOUN stock could be. In any case, I wouldn’t let the Trump tariff talks distract from the real AI opportunity at hand. 

As Trump moves markets with every word while SoundHound approaches its next quarterly earnings reveal (May 8, 2025), the risks of betting against the name seem quite pronounced. Personally, I’m no fan of the risk/reward of betting against such a name, especially as the AI race gets rolling again.

SoundHound stock may not be cheap, but that’s no reason to short its stock.

Of course, there are a number of factors that support the bear case for the firm. Most notably, the stock still doesn’t look cheap at around 30.0 times price-to-sales (P/S) and over 17.0 times price-to-book (P/B), even after shedding most of its value. Indeed, shorting a stock just because it looks pricey may not be the best move, especially when it comes to highly capable innovators that have the means to “grow” into their hefty multiples.

Indeed, Palantir (NASDAQ:PLTR) is another AI innovator that’s always appeared absurdly expensive on the surface. Given the caliber of business and the AI opportunity at hand (Wedbush Securities’ Dan Ives referred to Palantir as the “Messi of AI” on numerous occasions), perhaps higher multiples are more than forgivable if the competitive positioning and longer-term narrative are encouraging enough.

Now, SoundHound is no Palantir. But it does seem to possess a competitive advantage in the corner of conversational AI. Of course, the AI landscape is always moving and fast. The next big disruptor may yet to fly by our radars. In any case, the company’s contract wins, I believe, speak to the capability of its offering. The company’s partnership with Perplexity AI, an AI search juggernaut that could give Alphabet (NASDAQ:GOOG) Google a run for its money, for work on its voice assistant is perhaps most encouraging of them all. 

The bottom line

Personally, I think there are more reasons to be bullish than bearish on SoundHound, as, in due time, tariff headlines will ease, and taking their place will be progress on the AI boom once again. As the AI race takes an agentic turn, it’s names like SoundHound that could, once again, regain the faith of investors as rapid progression in AI agents could make the second half of 2025 far more upbeat and bullish than the first half.

Of course, we’ll need to wait and see if Trump can negotiate deals to avoid a potentially devastating global recession. Sure, the stakes are high, but shorting, I think, remains dangerous at a time like this. Betting against any stock seems to be a bet that Trump won’t back down from prior tariffs or that a de-escalation in the trade war with China won’t happen.

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