Shares of SoundHound AI (SOUN -11.57%) are plunging on Friday. The voice artificial intelligence (AI) technology company’s stock lost 14.5% as of 1:50 p.m. ET and was down as much as 18.7% earlier in the day. The steep decline comes as the S&P 500 and Nasdaq Composite both lost nearly 5%.
Already seeing pressure from President Donald Trump’s tariffs, the company faces a class action lawsuit from investors alleging it made misleading statements about its accounting practices.
Investor lawsuit filed
The law firm Kessler Topaz Meltzer & Check filed a class action lawsuit on behalf of shareholders on Thursday claiming issues with the company’s accounting practices. Specifically, the suit alleges that SoundHound failed to fully disclose the issues with its financial reporting.
According to the lawsuit, SoundHound allegedly gave investors the impression that it had resolved weaknesses in its internal financial controls when it had not. Adding fuel to the fire, this morning the company said it could not file its 2024 financial report on time because of the complexity surrounding recent acquisitions.
At the same time, the company’s stock is caught up in the escalating trade war hitting the whole market. Trump’s announcement of significant tariffs on nearly all of U.S. trading partners was met quickly with retaliatory tariffs, including a 34% levy from China.
There’s still a lot to prove for SoundHound
SoundHound rocketed to fame after AI giant Nvidia took a significant stake in the company. To the dismay of investors, Nvidia exited the position months ago and SoundHound’s stock has struggled since. The company’s technology is impressive and it has managed to partner with key players that lend credibility to the growing business, but AI is still in its relative infancy and SoundHound’s position is by no means safe. I would hold off on investing further in SoundHound.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
