Why is SoundHound AI stock down today?

As a result of the higher-than-expected inflation dataSoundHound AI firms(NASDAQ resonance code: SOUN)Stocks of the world's most popular stocks are falling today as the market sells off. Reports of high inflation make it less likely that the Fed will lower interest rates later this year, and high-priced, unprofitable growth stocks are generally more sensitive to interest rates and inflation than other stocks in the stock market.

That's probably doubly true for this AI stock, considering SoundHound's huge surge this year. As a result, the company's shares were down 7.1% as of 1:25 p.m. ET.

SoundHound's New Adventure Revealed

The Bureau of Labor Statistics reported this morning that the Consumer Price Index (CPI) rose 0.4% in March from February and 3.5% from the same month last year. these figures are higher than the consensus forecast of a 0.3% increase in the monthly rate and a 3.4% increase in the annual rate.

Core inflation, which excludes food and gas prices, was 0.4% higher than in February and 3.8% higher than a year ago. Both figures were also higher than expected.

The news led to a general decline in the stock market as investors believed it would cause the Fed to reduce the number of interest rate cuts it plans to make. Lower interest rates tend to favor growth stocks like SoundHound AI because they are valued based on earnings in the distant future according to discounted cash flow models. These earnings are more valuable when rates are low than when rates are high.

What's next for SoundHound AI?

It's easy to see why SoundHound is sensitive to macroeconomic conditions. The company's revenues for the most recent quarter were still small, at $17.1 million. While the company is growing rapidly, with revenues up 80% in the fourth quarter, much of this new revenue is coming from companies that are experimenting with its voice-activated technology, and its customers are unlikely to embrace the new technology or spend money on the new product in tough economic times.

While the economy looks stable at the moment, high inflation and interest rates could cool off, putting pressure on stocks like SoundHound AI, which are small, unprofitable, and expensive, with a trailing price-to-sales ratio of 24.

Should you invest $1,000 in SoundHound AI right now?

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Jeremy Bowman does not own any of the shares listed above.The Motley Fool does not own any of the shares listed above.The Motley Fool has a disclosure policy.

Why is SoundHound AI stock down today?