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Nvidia-Backed SoundHound AI Tumbled This Week on Short-Selling Report, Downgrade

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Nisha Gopalan
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Nisha Gopalan is the Senior Overnight Assignment Editor for Investopedia News. She is an award-winning financial journalist who has worked in London, where she is currently based, and Hong Kong. She previously worked at The Wall Street Journal and Bloomberg. 
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Published March 22, 2024
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KEY TAKEAWAYS

  • Shares in SoundHound AI have plummeted this week after they were hit by a short-seller report from Capybara Research and the company reportedly was downgraded to "underweight" by Cantor Fitzgerald analysts.
  • Capybara Research alleged that SoundHound AI’s speech recognition tech is a “commodity service” and that the company is “failing.”
  • A Feb. 14 regulatory filing showed that Nvidia had 1.73 million SoundHound AI shares. 

Shares in SoundHound AI Inc. (SOUN) shot up after Nvidia Corp. (NVDA) disclosed a stake in the AI voice solutions provider last month, but the past few days have been less than stellar for the company.

Its volatile shares are down about 33% this week following a short seller’s report on Tuesday, then a reported downgrade of the stock to "underweight" from "overweight" by Cantor Fitzgerald analysts Wednesday.

A short-selling report issued by Capybara Research titled "Lies, Damned Lies, and Cheeseburger 'AI'" alleges that SoundHound AI is a "failing company peddling lies and deception."

The report claims SoundHound’s speech recognition tech is a “commodity service" that competes with comparable products from Amazon (AMZN), Alphabet’s Google (GOOGL), Microsoft (MSFT) and Apple (AAPL), among others. It also says that SoundHound's closest competitor, Cerence (CRNC), "spends far more on [research and development] than SoundHound and has been taking their customers." 

“After 18 years of losses, and multiple pivots, the company still has no clear path to profitability,” the short sellers allege, saying they "believe that SoundHound is worth $1.00 per share or less," well below its price Friday afternoon around $6 a share.
A spokesman for SoundHound wasn't immediately available to comment on the Capybara Research report on Friday.

SoundHound offers its AI voice products to the auto industry, restaurants, call centers, and various other end markets. A Feb. 14 regulatory filing showed that Nvidia had 1.73 million SoundHound shares valued at roughly $3.67 million as of the end of 2023.

Shares of SoundHound were off about 10% at $6.03 a share as of 2:10 p.m. ET Friday.
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  1. Investing.com. “.”
  2. Capybara Research. “.”
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