Nvidia Sells Off SoundHound AI Stake: What It Means for Investors and the AI Industry

Nvidia (NASDAQ: NVDA) has officially divested its stake in SoundHound AI (NASDAQ: SOUN), a move that has sparked intense discussion among investors and analysts alike. The revelation came through a 13-F filing with the Securities and Exchange Commission (SEC), confirming that the chip giant no longer holds shares in the AI-driven voice technology company. This news sent SoundHound’s stock plunging 28% on February 14, raising questions about the company’s future trajectory and the broader implications for the AI industry.

The Role of SoundHound AI in the Voice Technology Landscape

SoundHound AI is a California-based company specializing in white-label voice artificial intelligence. Unlike mainstream AI voice assistants such as Apple’s Siri or Amazon’s Alexa, which are tightly controlled within their respective ecosystems, SoundHound provides businesses with the ability to create custom voice assistants. This allows companies to retain control over branding, data, and user experience, making SoundHound an attractive option for enterprises looking for AI-driven voice solutions.

The company has established a diverse client base, spanning multiple industries. Major names such as Mercedes-Benz, IHG Hotels, and Spotify have leveraged SoundHound’s technology to enhance their customer interactions. One of its standout innovations is an in-vehicle voice assistant powered by a large language model built on Nvidia’s Drive technology. This underscores the deep technological synergy the two companies once shared.

Nvidia’s Investment and Subsequent Exit

In February 2024, Nvidia disclosed an investment of $3.7 million in SoundHound, a strategic move that underscored its commitment to AI-driven voice technology. Given Nvidia’s dominance in the AI hardware space, this partnership signaled strong industry confidence in SoundHound’s potential.

However, the recent decision to exit its position in SoundHound has raised eyebrows. While the exact reasons behind Nvidia’s divestment remain speculative, analysts point to a few key factors:

• Strategic Portfolio Adjustment: Nvidia may be reallocating capital towards higher-priority AI ventures, particularly in the booming generative AI and data center markets.
• Market Conditions: SoundHound AI has seen its stock struggle, with a 53.58% decline year-to-date, which could have influenced Nvidia’s decision to cut losses.
• Earnings Performance: While SoundHound recently reported strong financial results, Nvidia’s move could reflect concerns over the company’s long-term scalability.

SoundHound’s Response and Continued Partnership with Nvidia

Despite Nvidia’s exit as a shareholder, SoundHound remains optimistic about its future. During a February 27 investor call, CEO Keyvan Mohajer reaffirmed the company’s robust industry presence, particularly at CES 2024, where SoundHound unveiled groundbreaking innovations.

Mohajer highlighted collaborations with Nvidia, Perplexity, Lucid Motors, LG, and key players in the restaurant industry. He also confirmed that SoundHound will participate in Nvidia’s GTC 2025 event, where it plans to showcase demos of its voice assistant technology, leveraging generative AI on the edge with Nvidia DRIVE AGX and its expanding voice commerce ecosystem.

SoundHound’s Stock Performance and Earnings Report

Following the announcement of Nvidia’s divestment, SoundHound’s stock initially tumbled. However, the company quickly rebounded after delivering a strong year-end performance on February 27. The stock rallied 17.48% in the session following the earnings report, signaling renewed investor confidence.

Key Financial Highlights:

• Q4 2024 Earnings: Reported a loss per share of $0.05, beating Wall Street’s estimate of a $0.08 loss.
• Revenue: Surpassed expectations at $34.5 million, exceeding the projected $33.7 million.
• Cash Reserves: Closed the year with nearly $200 million in cash and no debt, providing a strong liquidity position.
• Revenue Outlook for 2025: Adjusted to a range of $157 million to $177 million, up from the previous forecast of $155 million to $175 million.

While this revenue guidance represents a modest increase, it still fell short of the consensus estimate of $165.27 million, leading to some cautious investor sentiment.

What’s Next for SoundHound AI?

With Nvidia out of the picture as a stakeholder but still a technology collaborator, SoundHound is at a pivotal juncture. The company continues to innovate in the AI-powered voice assistant space and has positioned itself as a key player in conversational AI and agentic AI solutions.

Key areas to watch include:

1. Strategic Partnerships: Continued collaborations with Nvidia and other tech leaders will be crucial for sustaining momentum.
2. Revenue Growth: Investors will monitor whether SoundHound can meet or exceed its revised revenue guidance.
3. Industry Trends: As generative AI and voice commerce gain traction, SoundHound’s ability to capture market share will be closely scrutinized.

Final Thoughts

Nvidia’s exit from SoundHound AI has undoubtedly raised concerns, but it does not necessarily spell doom for the company. SoundHound’s solid earnings report and ongoing partnerships indicate resilience. As AI technology continues to evolve, SoundHound AI’s ability to leverage its expertise in voice recognition and conversational AI will be critical to its long-term success.

For investors, the key question remains: Is SoundHound AI a hidden gem in the AI industry or a high-risk bet in a volatile market? As developments unfold, this stock will remain one to watch.