SoundHound AI, Inc. (NASDAQ:SOUN) enters the new week with a substantial short bet against its stock, as 162.9 million shares were sold short as of June 30, representing 41.3% of its public float. This short interest, which reflects shares borrowed and sold by investors anticipating a price decline, increased by 1.2% from the previous report, according to MarketBeat data released Friday. The elevated short position translates to approximately 6.5 days to cover, meaning it would take more than a week of average trading volume to close all short positions.
The stock itself did not confirm the bearish sentiment. SoundHound closed Friday at $6.64, down 0.6% on the day but up 1.4% from its July 2 close. Trading activity was robust, with 144.1 million shares changing hands between July 6 and July 10. Notably, the June 30 short position was equivalent to 1.13 times the entire week's turnover. At Friday's closing price, the total short position is valued at roughly $1.08 billion, nearly 38% of the company's market capitalization based on the reported share count.
This imbalance between short interest and trading volume creates a dual-edged scenario. A short squeeze, where bearish investors are forced to buy back shares to cover losses, could amplify any rally. Conversely, negative company news could exacerbate a decline. Last week, SoundHound shares traded in a range of $6.37 to $7.09, an 11.3% spread, before closing with a modest gain that lagged the Nasdaq Composite's 1.7% advance.
Compared to peers, SoundHound's short interest stands out. Cerence Inc. (NASDAQ:CRNC), a closer operating peer focused on automotive voice software, had a short float of 14.7% as of June 30, while C3.ai, Inc. (NYSE:AI), a broader enterprise AI company, had 39.1%. SoundHound's short float is nearly 2.8 times that of Cerence and slightly above C3.ai's. Analysts remain divided: D.A. Davidson's Gil Luria has a Buy rating and a $12 price target, citing near-term profitability and execution challenges, while H.C. Wainwright's Scott Buck targets $20, partly based on expected adjusted operating break-even by year-end.
The company's financial performance explains the divergence. First-quarter revenue surged 52% to $44.2 million, but adjusted EBITDA swung to a loss of $26.7 million, wider than the $22.2 million loss a year earlier. SoundHound used $26.3 million in cash from operations and ended March with $216 million in cash and no debt. Excluding acquisitions, CEO Keyvan Mohajer noted that revenue was up 88% in the core automotive and IoT AI vertical. The company maintains its 2026 revenue forecast of $225 million to $260 million.
The pending acquisition of LivePerson Inc. (NASDAQ:LPSN) adds another layer of uncertainty. An amended agreement on July 2 set base aggregate consideration at $42.78 million, subject to adjustments for LivePerson's cash and options. The stock consideration uses a 10-day average of SoundHound shares with a $7 floor and $12 cap. Since SoundHound's stock finished below $7, the floor would limit the shares issued if the closing average remains below that level. The transaction faces closing conditions and a deadline of October 21, with a possible extension to December 5.
Despite the high short interest, a squeeze is not guaranteed. The short position data is already 10 days old, SoundHound continues to burn cash, and the LivePerson acquisition could face delays or integration challenges. At Friday's close, the company's market cap was about $2.87 billion, or 11.9 times the midpoint of management's 2026 revenue guidance. A revenue miss or continued margin pressure could compress that multiple before short sellers are compelled to exit.
SoundHound has no upcoming investor events, leaving external catalysts to drive next week's trading. Key data includes June consumer inflation (CPI) on Tuesday, July 14, producer prices on Wednesday, and retail sales on Thursday, alongside major bank earnings and geopolitical headlines from Iran. For a loss-making growth stock, any uptick in expected interest rates could weigh heavily. Michael Reynolds, vice president of investment strategy at Glenmede, noted "some skepticism around the AI trade" and "a lot of factors coming to a head all at once."
