SoundHound AI is doing something unusual: the stock is rising, the short base is finally shrinking, and yet the borrow market remains completely locked — a combination that signals the squeeze dynamics discussed in recent notes are beginning to bite.
The price move is the new development. SOUN closed at $9.00 on May 29, up 10.2% on the week and 11.7% over the past month. That is the clearest directional signal in weeks. The previous note flagged that shorts had "settled" after the May 22 earnings call — this week the stock accelerated through that settling into genuine upside momentum, while short interest dropped to 37.9% of the free float from 39.0% reported just days ago. That is still an extreme level, but the direction has changed. Shorts are covering, and the price is moving against them.
The borrow market makes that covering painful. Availability remains at exactly 0% — every share in the lending pool is still lent out, a condition that has persisted almost without interruption since late April. There is no new supply entering the market. Shorts who want out must buy in the open market, with no ability to roll or transfer positions cheaply. Cost to borrow has fallen sharply from its early-May peak near 61%, landing at 17.7% — still a meaningful annual carry on a $9 stock. The ORTEX short score is 83.0, down from 85.5 two weeks ago, reflecting the gradual but real reduction in short positioning. The direction of travel in the score has been consistently lower for ten sessions. Peer context reinforces the directional read: is up 43.6% on the week and gained 26.8%, suggesting broad-based strength in correlated names that is pulling SOUN higher alongside it.
Options traders are leaning bullish, not defensive. The put/call ratio dropped to 0.44 on May 29, below its 20-day average of 0.46 and roughly one standard deviation below the mean — the most call-heavy reading in several weeks. That is consistent with a market positioning for further upside rather than bracing for a reversal. The 52-week PCR range runs from 0.31 to 0.67; the current reading sits in the lower third, confirming that options sentiment has not turned cautious as the stock has rallied. The two groups — short sellers and options traders — are no longer pulling in opposite directions. Now both are effectively aligned against the bears: options markets are buying calls, and the absence of available borrows is preventing any reinforcement of the short side.
The Street remains split but has a mild bullish lean. The consensus is a hold, reflecting a small coverage base, with the mean price target at $14.25 — implying roughly 58% upside to the current price. The most recent action, DA Davidson maintaining its Buy at $14 in late April, is now just outside the 14-day freshness window but consistent with a thesis that has not changed. The bear case centres on valuation — ~30x 2026 revenue is at the premium end for software, and execution risk in a fast-moving Voice AI market is real. The bull case points to a debt-free balance sheet, growing royalty streams, and voice commerce optionality. EPS momentum factor scores are near the top of the universe — 100th percentile on 30-day momentum and 98th on forward year-over-year increase — suggesting that analyst estimate revisions have been sharply upward even as the trading multiple stays controversial. EPS surprise ranks in the 86th percentile. The quality story remains weak, with negative ROA and a low F-Score, but the momentum-versus-quality tension is not new to this name.
On the institutional side, BlackRock holds 7.5% of shares and added nearly one million shares in the most recent reporting period. Goldman Sachs added 3.5 million shares as of March 31. Both co-founders — CEO Keyvan Mohajer and Chief Scientific Officer Seyed Emami — sold small clips in March at around $6.79, well below the current price. Those sales carry low significance scores and occurred during what was a broader market dip; with the stock now 32% higher than those transaction prices, the insider signal is stale rather than alarming.
The next earnings event is scheduled for August 6. Between now and then, what matters most is whether the short book continues to shrink as the borrow wall prevents any rebuilding — and whether the EPS estimate momentum translating into factor-score upgrades starts to shift the consensus rating from hold toward something more constructive.
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