SoundHound AI has reversed course sharply, dropping 18% on the week to $7.39 — and the squeeze dynamics that briefly powered the stock toward $9 have unwound without the short base doing the same.
The new development since the June 3 note is the price action itself. Three weeks of slow short covering and a rising stock have given way to a hard reversal. SOUN is down 19% over the past month, erasing the May rally entirely. The short interest has barely budged in response. At 37.4% of the free float — 145 million shares — the short position remains near its recent floor rather than accelerating lower. The ORTEX short score has eased slightly to 79.99 from 82 a week ago, but that is still deep in extreme territory. Shorts covered when the stock ran; they have not materially re-added on the decline, but they haven't been shaken out either.
The borrow market has continued its one-directional move. Cost to borrow has dropped again, now at 11.7% — down 28% on the week and more than halved from the 26% level of mid-May. That reduction in carry cost matters: shorts are no longer paying 60% annualised as they were in early May, but something closer to 12%. The urgency to cover has eased. Yet availability remains at exactly 0% — every share in the lending pool is lent out, a condition that has held almost unbroken since late April. The borrow market is fully sealed. Shorts cannot add new positions, and anyone wanting to exit still faces a stock market route rather than a lending market solution. Those two forces — easing carry cost and zero availability — continue to describe the same locked structure noted in prior weeks.
Options positioning has shifted to one of the more call-heavy setups in the past year. The put/call ratio has dropped to 0.42, running 1.4 standard deviations below its 20-day average and approaching the 52-week low of 0.31. That is a notably bullish lean from the options market, even as the stock falls. It suggests traders are not buying downside protection into the weakness — they are buying calls, perhaps anticipating another reversal or simply maintaining a speculative long bias through options rather than shares. Against a short book that has barely moved, this divergence is the clearest tension on the name right now.
The Street provides limited fresh guidance. The most recent analyst action was DA Davidson maintaining its Buy rating and $14 target in late April — a level still roughly 90% above the current price. HC Wainwright holds a $20 target, though that was set in early March. Piper Sandler holds a Neutral with a $9 target, close to where the stock was trading before this week's drop. None of these actions are current enough to reflect the May earnings reaction or the subsequent price weakness. The ORTEX factor scores do offer one clear positive: earnings momentum ranks in the 99th percentile on a 90-day basis, with the 30-day EPS momentum score also at the top of the universe. That growth signal is real — the quality scores remain poor, with negative ROA and a weak Piotroski score — but the forward growth narrative is intact even as the stock retreats.
The pattern across the peer group confirms this is a sector-wide move rather than idiosyncratic. ARQQ fell 26% on the week, HOLO dropped 20%, and AUR lost 14%. SOUN's 18% decline sits in the middle of that range, suggesting the selloff is macro or sentiment-driven rather than stock-specific. The next scheduled earnings date is August 6. Between now and then, the key variable to watch is whether the slow short-covering trend resumes as carry costs continue to fall — or whether the cheaper borrow encourages fresh shorts to re-enter into a stock that has now given back all of its post-earnings gains.
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