SoundHound AI (NASDAQ:SOUN) certainly benefited when the artificial intelligence trend swept through Wall Street. You may choose to hold SoundHound AI stock if you’re bullish on AI technology for the long term. In the final analysis, we’re assigning a “B” grade to the stock as the risks and potential rewards are considerable.

SoundHound AI occupies an interesting niche in the AI-technology landscape. Specifically, the company specializes in AI for voice applications. There’s a major event coming soon for SoundHound AI, so even if you believe in the company’s growth story, it makes sense to hedge your bets in the short term.

SoundHound AI: Mark Your Calendar for This Date

We’ll just cut right to the chase. SoundHound AI will publish its first-quarter 2024 financial results on May 9 after the market closes. The company has a hit-and-miss track record for quarterly EPS beats versus misses.

The company has been consistently unprofitable and will almost certainly post another unprofitable quarter. This may be a deal breaker for highly risk-averse investors.

Some people might find it off-putting that SoundHound AI plans to sell $150 million worth of its shares through an at-the-market equity offering. This announcement raises share-value dilution concerns for current SoundHound AI investors.

You’ll want to consider your tolerance for volatility if you’re thinking about taking a share position in SoundHound AI. Believe it or not, the stock rallied from $1.63 to $9 earlier this year, only to fall back to $4.40 recently.

The upcoming earnings event will probably be accompanied by a high degree of volatility. It’s not a terrible idea to just wait until you have SoundHound AI’s first-quarter results in hand before making any investment decisions.

SoundHound AI: Load Up When the Price Is Down?

Granted, share-price volatility can work in the investors’ favor sometimes. For instance, SoundHound AI stock rallied 10% on April 23 even though there wasn’t any significant company-specific news on that day.

How could this have happened? Apparently, the market was hyped up about AI-related stocks on that day. Thus, as AI-associated sentiment rises and falls, you can often expect the SoundHound AI share price to follow that sentiment.

Also, as the old saying goes, volatility can lead to opportunity. Per TheFly, Cantor Fitzgerald analyst Brett Knoblauch sees the downside risk and upside risk as being equal after the contraction in SoundHound AI’s share price and valuation.

To put it another way, the volatility in SoundHound AI stock actually led to a more palatable valuation. So, Knoblauch upgraded his SoundHound share rating from “underweight” to “neutral.”

This doesn’t mean you need to load up on SoundHound AI stock. It’s just something to consider as the stock may have a more favorable risk to reward profile when it’s down.

SoundHound AI Stock: Don’t Go Overboard

If the AI-technology market grows, it’s likely that SoundHound AI shares will gain value. Along the way, however, there will be ups and downs in sentiment. Some investors might find it problematic that SoundHound AI is unprofitable and plans to sell a large number of shares.

That said, our goal isn’t to scare everyone away. SoundHound AI is an intriguing company in a highly specific AI niche market.

At the end of the day, you’ll want to really think about your tolerance for volatility. Along with that, it’s wise to keep your position size small so that you can handle wild share-price swings.

All things considered, SoundHound AI stock gets a “B” grade and may be revisited after the company reports its quarterly results on May 9.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.