Why SoundHound AI Stock Is Skyrocketing Today

SoundHound AI (NASDAQ: SOUN) stock is surging higher in Wednesday's trading. The company's share price was up 11% as of 11 a.m. ET and had been up as much as 14.9% earlier in the daily session. Meanwhile, the S&P 500 index was up 1.6% and the Nasdaq Composite index was up 2.1%.

SoundHound AI is seeing strong gains today, thanks to bullish inflation news. The stock is also getting a boost from an analyst price-target increase. Over the last year, the company's share price is now up 642%.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

SoundHound AI rockets higher on inflation data

The Bureau of Labor Statistics (BLS) published its latest Consumer Price Index (CPI) report, and the data is powering big gains for SoundHound AI and other growth stocks. The CPI report showed that core inflation came in at 3.2% in December, which was lower than the average economist's forecast for inflation of 3.3%. After factoring in food and energy costs, overall inflation came in at 2.9% -- in line with expectations.

The lower-than-anticipated CPI inflation is making investors more confident that the Federal Reserve will continue to cut interest rates. The BLS' most recent jobs report arrived with more jobs growth than economists had expected and raised concerns that inflationary pressures could be increasing, but today's CPI report is helping to alleviate those concerns.

Companies with growth-dependent valuations tend to perform much better in lower-interest-rate environments, due to lower borrowing costs and more favorable risk-reward dynamics. With SoundHound AI valued at roughly 33 times this year's expected sales, the conversational artificial intelligence (AI) specialist is certainly included in that category.

SoundHound AI stock gets a lift from analyst coverage

In addition to bullish inflation news, SoundHound AI stock is also climbing higher in conjunction with recent analyst coverage. In a note published yesterday, Northland Securities maintained a market-perform rating on the stock and raised its one-year price target from $6 per share to $8 per share. Even though that price target implies significant downside potential, the increase suggests that Northland thinks the stock's performance outlook has improved.

Notably, Northland's target for the stock is significantly lower that others that have been issued recently. In December, Wedbush's Daniel Ives raised his one-year price target on the stock from $10 per share to $22 per share. Soon after, H.C. Wainwright's Scott Buck increased his target on the stock from $8 per share to $26 per share.

SoundHound has established itself as an early frontrunner in the rapidly expanding conversational AI space. The company has been posting rapid sales growth and could have a huge runway for long-term expansion. However, its growth-dependent valuation and speculative industry outlook also mean that the stock comes with a relatively high level of risk.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $341,656!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,179!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $446,749!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of January 13, 2025

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.