Earlier in the year, SoundHound AI (NASDAQ: SOUN) stock experienced a significant surge in price, but it has now returned to its previous level. This correction included a drop of approximately eight percent just today, as of the middle of the trading day. In spite of this, the value of the shares has nearly doubled in 2024.
Considering that the momentum has slowed down, investors may be asking whether the decrease in stock prices is an opportunity to acquire a stake in the company that is responsible for developing artificial intelligence (AI) technology for voice
The news that impacted the price today is the reason why investors should hesitate before jumping into the stock. This is despite the fact that sales have been increasing as a result of an increasing number of businesses adopting conversational artificial intelligence chatbots.
The utilization of ChatGPT's expanding market share In a filing with the Securities and Exchange Commission, the firm said that it had made agreements to sell up to $150 million worth of stock in order to acquire new money.
When compared to a company that has a market cap of less than $1.5 billion, that indicates a significant amount of more stock. Due to the fact that the new at-the-market equity program has the potential to result in a total dilution of around 10% for current owners, investors have reacted strongly to the news that was released today.
Nevertheless, investors ought to be concerned about the matter if they probe deeper. As of right now, SoundHound AI is not profitable. The company recorded a loss of approximately $90 million in 2023, despite the fact that sales have been increasing as a result of the expansion of the usage of speech technology and ChatGPT into a wide variety of various industries.
The cash on hand for SoundHound AI was only $109 million as of the 31st of December, 2023. It is easier to see why it is necessary to raise funds. During the following two years, the management anticipates that sales will increase at a rate that is greater than forty percent on an annual basis.
The market has been becoming increasingly skeptical of businesses that are not earning profits, particularly in recent years. As a consequence of the inflation statistics that was made public today, interest rates saw a significant increase. As a result, the expenses of borrowing money would increase even further.
This could result in further lower share prices for SoundHound AI in the future, especially if the company continues to take on more expensive debt or uses stock that dilutes the ownership of existing shareholders.
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