Billionaire Dumps Popular AI Stock

In the second quarter, billionaire Steven Cohen exited its entire position in SoundHound AI, a company once touted as one of the purest ways to invest in voice-driven artificial intelligence.

The move came after SoundHound’s stock had surged more than 3x in a year as investors piled into anything labeled “AI.”

So why would one of Wall Street’s most sophisticated investors bail out just as the hype peaked?

Key Points

• After SoundHound’s 3x surge and lofty 50x sales multiple, Cohen locked in gains.

• SoundHound’s soaring revenue came with shrinking margins, rising losses, and tougher competition.

• Cohen rotated into proven winners like Nvidia and Microsoft, mirroring a wider move from hype to fundamentals.

Cohen’s Contrarian Edge

Cohen built his empire by spotting inflection points before others do. His trades may look abrupt from the outside, but they follow a familiar playbook to find asymmetric bets early, ride momentum, then exit before risk outweighs reward.

He blends deep fundamental analysis with quantitative signals, Point72 reportedly taps into more than a thousand alternative data streams, from satellite imagery to transaction data, to spot subtle shifts in real time.

That adaptability is key. Cohen doesn’t marry a theme, not even one as powerful as AI, if valuations get stretched.

When Price Runs Ahead of Progress

By mid-2025, SoundHound’s valuation had ballooned to over 50x sales, an eye-popping multiple for a company with only one profitable quarter in three years. Even bulls began to blink. The average Wall Street price target sat near $16.50, implying downside from its $19 trading range.

For someone as valuation-sensitive as Cohen, those numbers likely set off alarms. He’s made a career out of stepping aside before narratives crumble under their own weight.

Competition Closes In

SoundHound was once the undisputed leader in conversational AI, powering infotainment systems for Hyundai, Stellantis, and Mercedes-Benz and automating drive-through orders for major chains. But the moat has narrowed fast.

Alphabet and Amazon, armed with near-unlimited budgets and cloud dominance, are pushing aggressively into the same markets.

Even McDonald’s ended its trial of AI drive-throughs with IBM this year, highlighting how competitive, and difficult, this segment has become. The giants’ scale threatens to erode SoundHound’s once-formidable edge.

Growth That Comes at a Cost

In the same quarter Cohen sold, SoundHound posted a just over 3x revenue jump to over $42 million, thanks to restaurant clients like Red Lobster and IHOP, plus new wins in China’s fast-growing auto market.

But rapid growth masked a deeper issue: margins and losses. Gross profit rose nearly 2x, but gross margin dropped 24%, and net losses doubled to $74 million. Even with about $230 million in cash and no debt, SoundHound’s burn rate remains high, a red flag for someone who prizes risk control.

Where Cohen’s Capital Is Flowing

Cohen didn’t just sell SoundHound, he reallocated aggressively. Point72 boosted its Nvidia stake by just above 200% and Microsoft by roughly two-thirds, while also adding to Amazon, Arista Networks, and Snowflake.

The message is clear: that Cohen is shifting from speculative AI plays toward the companies supplying the infrastructure behind the boom, cloud platforms, GPUs, and networking gear. It’s a safer way to participate in AI’s long-term upside without the fragility of early-stage bets.

Notably, Ken Griffin’s Citadel and Dan Loeb’s Third Point have made similar rotations, trimming high-fliers like Palantir while building stakes in Nvidia and Microsoft. Smart money seems to be migrating from story stocks to proven winners.