What Happened?

A number of stocks fell in the afternoon session after investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week. 

The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Automation Software company SoundHound AI (NASDAQ: SOUN) fell 10.9%. Is now the time to buy SoundHound AI? Access our full analysis report here, it’s free.
• Content Delivery company Cloudflare (NYSE: NET) fell 3.8%. Is now the time to buy Cloudflare? Access our full analysis report here, it’s free.
• Data Infrastructure company C3.ai (NYSE: AI) fell 5.1%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free.
• Data Analytics company Domo (NASDAQ: DOMO) fell 6.5%. Is now the time to buy Domo? Access our full analysis report here, it’s free.
• Advertising Software company The Trade Desk (NASDAQ: TTD) fell 4.8%. Is now the time to buy The Trade Desk? Access our full analysis report here, it’s free.

Zooming In On SoundHound AI (SOUN)

SoundHound AI’s shares are extremely volatile and have had 89 moves greater than 5% over the last year. But moves this big are rare even for SoundHound AI and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 1 day ago when the stock dropped 4.8% on the news that investor sentiment soured on the company's valuation and lack of a clear path to profitability, compounded by a recent analyst downgrade. The decline appears driven by mounting concerns over the company's valuation relative to its financial performance. Despite strong customer acquisition and increased revenue guidance for 2025, SoundHound AI remains unprofitable with widening losses. One analysis noted the stock trades at a premium, with its AI-driven optimism potentially fully priced in. This fundamental disconnect was highlighted in its last quarterly earnings report, where the company missed consensus estimates for earnings per share.

SoundHound AI is down 34.1% since the beginning of the year, and at $13.27 per share, it is trading 45.2% below its 52-week high of $24.23 from December 2024. Investors who bought $1,000 worth of SoundHound AI’s shares at the IPO in April 2022 would now be looking at an investment worth $1,771.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.