Why SoundHound Stock Plummeted Today

On Monday, shares of SoundHound AI (SOUN -11.17%) experienced a significant decline, plummeting by 11.2% by 4:30 p.m. ET, with earlier losses reaching up to 12.9%. This drop occurred amid broader market declines, with the S&P 500 and Nasdaq composite falling by 1.5% and 3.1%, respectively.

Since its presentation at CES 2025 in early January, SoundHound’s stock has been struggling, down nearly 30% as investors reacted to the event’s developments. The performance on this particular day was even more challenging due to market reactions to the news surrounding a disruptive new competitor in the artificial intelligence field called DeepSeek.

SoundHound's Disappointing Presentation

CES is a major technology event that garners extensive attention from both investors and tech enthusiasts. SoundHound’s presentation was highly anticipated; however, many viewers were left unimpressed by the demonstration of its in-car voice "commerce" platform. Investors noted that the platform seemed to offer little in terms of actual value, while simultaneously increasing costs and power consumption, leading to disappointment and skepticism.

DeepSeek's Entry Raises Concerns

The lackluster performance at CES made SoundHound particularly vulnerable to negative sentiment following news about DeepSeek. This new competitor from China has entered the AI race, creating a model that rivals offerings from established players like Amazon and OpenAI. Although DeepSeek lacks the same level of funding and hardware as its U.S. counterparts, its technological capabilities threaten to challenge market dynamics. Investors are now concerned about a potential decline in demand for U.S. AI solutions, worrying that domestic technology might be overshadowed by advancing international competitors like DeepSeek.

The combination of these factors contributed to a sharp decline in SoundHound's stock, reflecting broader nervousness within the AI sector.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

SoundHound, AI, Stocks