What Happened?
A number of stocks fell in the afternoon session after the latest Consumer Price Index (CPI) report came in hotter than expected, signaling that inflation remained stubbornly high.
The April CPI data revealed a 3.8% annual increase, surpassing economists' forecasts. This report is a key measure of inflation, tracking the average change in prices paid by consumers for goods and services. The persistent inflation is significant because it dampens expectations for the Federal Reserve to cut interest rates.
Higher interest rates for a longer period tend to negatively impact growth-oriented sectors like technology and software, as they make the companies' future earnings less valuable in today's terms. With the prospect of rate cuts diminishing, investors reassessed valuations, leading to a broad sell-off across the tech sector.
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 5.7%. Is now the time to buy SoundHound AI? Access our full analysis report here, it’s free.
- Sales Software company HubSpot (NYSE: HUBS) fell 4.3%. Is now the time to buy HubSpot? Access our full analysis report here, it’s free.
- Project Management Software company Asana (NYSE: ASAN) fell 2.6%. Is now the time to buy Asana? Access our full analysis report here, it’s free.
- Video Conferencing company Zoom (NASDAQ: ZM) fell 3.7%. Is now the time to buy Zoom? Access our full analysis report here, it’s free.
- Content Delivery company Akamai (NASDAQ: AKAM) fell 5.4%. Is now the time to buy Akamai? 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 64 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 12.1% on the news that the company reported mixed first-quarter results, where a wider-than-expected loss overshadowed strong revenue growth.
SoundHound's revenue grew 51.7% year-over-year to $44.2 million, beating analyst estimates. However, the company posted a GAAP loss of $0.11 per share, which was slightly worse than the $0.10 loss analysts had anticipated. The negative investor reaction suggests a growing emphasis on profitability and positive cash flow for AI companies, not just rapid growth.
Despite the top-line beat, the company's ongoing cash burn, which was $26.73 million for the quarter, and its negative operating margin of -51.3% raised concerns and prompted the sell-off.
SoundHound AI is down 25.1% since the beginning of the year, and at $7.94 per share, it is trading 62.9% below its 52-week high of $21.40 from October 2025. 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 $1,058.
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