OpenAI Hardware Pivot Sends Blunt Warning to Audio Giant. How to Play Hard-Hit Sonos Stock Here.

OpenAI, the artificial intelligence (AI) company behind ChatGPT, is entering a key market and now wants a place on your kitchen counter. A new report says the company is building its first piece of consumer hardware, and it looks a lot like a smart speaker. 

This news has landed hard on a small-cap company that operates in the segment. Sonos (SONO) investors got a rough reminder this past week that the smart home speaker business is about to get a lot more crowded.

Sonos Has Been Rebuilding Its Story

Sonos has spent much of the past two years digging out of a hole. A troubled software update in early 2024 damaged customer trust, and the company has been working to win it back ever since.

At a Morgan Stanley technology conference in March, Sonos CEO Tom Conrad laid out a plan built around five growth levers: new hardware, customer advocacy, stronger marketing, expansion into new countries, and what he called emerging “adjacencies” around voice and AI. Conrad said that Sonos sits in 17 million homes with “tens of millions of microphones” already installed, and that this reach gives the firm a real shot at becoming part of how people use conversational AI at home.

On the company's second-quarter earnings call in May, Conrad said Sonos returned to growth, with revenue up 8% year-over-year (YOY) to $282 million. He pointed to strong reviews of the new Sonos Play speaker and said AI is already reshaping how Sonos builds software and runs its internal operations. 

The CEO also said that the bigger opportunity — using Sonos' huge installed base of connected, voice-enabled devices for AI services — was still coming, although he was not ready to share details yet.

OpenAI Is Reportedly Entering the Speaker Market

According to recent reports, OpenAI is developing a mobile, screen-free smart speaker, marking its first real push into consumer hardware. The device would run on ChatGPT and be designed to learn a user's habits over time, offering help before being asked rather than only responding to commands. As a full smart-home hub, the device would play audio, control connected appliances, answer questions, handle messages, and more. 

Report also noted that this hardware push comes as OpenAI quietly prepares for an initial public offering (IPO) in the coming months, and that the company would compete directly with Amazon (AMZN), Alphabet (GOOGL), and Apple (AAPL). Apple and OpenAI already have a heated rivalry, given that Apple filed a lawsuit against the company this month over alleged trade-secret theft. 

OpenAI reportedly believes its speaker is different enough from Apple's products to avoid legal issues. Still, while AAPL stock trades near record highs, SONO stock dipped 9% on July 14 after the OpenAI device news. SONO stock is also down 24% from its 52-week high. 

At the Morgan Stanley conference, Conrad argued Sonos does not really compete with Samsung on soundbars or Bose on headphones. The real competition, he said, is over who controls the sound experience in the home, and he named Amazon, Apple, and Google as the companies fighting for that role.

OpenAI was not on that list a few months ago. Now it might be, and it is arriving with something Sonos does not have: a massive AI chatbot already used by millions of people.

What Is Next for Sonos Stock?

Sonos still has real advantages. It has 53 million connected devices already in customer homes, a strong reputation for sound quality, and a growing installer business that made up about 22% of revenue last quarter. Conrad has also said the company is managing rising memory chip costs, which are expected to pressure gross margins further in the second half of the fiscal year.

But the OpenAI report adds pressure to a plan that was already racing against time. Sonos wants to turn its huge base of microphones and speakers into an AI platform. If OpenAI ships a device built specifically to be that platform, Sonos may need to move faster than it initially planned — and show investors something more concrete than a promise to share details later.

Analysts tracking SONO stock have a consensus “Moderate Buy” rating on shares. Out of the four analysts covering SONO stock, two recommend a “Strong Buy” while two recommend a “Hold” rating. The average price target of $19 represents potential upside of roughly 26% from current levels.