SoundHound AI has surged 429% in 2023, focusing on diverse AI markets, while Cerence AI serves the auto industry, demonstrating profitability. SoundHound anticipates further revenue growth but remains unprofitable, while Cerence faces slight revenue declines. Ultimately, Cerence’s stability makes it a safer investment choice.
In the vibrant world of artificial intelligence (AI), two companies, SoundHound AI and Cerence AI, vie for the spotlight. Since late 2022, SoundHound AI, though not widely recognized, has experienced a remarkable 429% surge in its stock price, boasting a market capitalization of $4 billion. With its focus on voice-activated technology for various industries, investors are considering its potential alongside Cerence AI, a smaller player valued at approximately $400 million that specializes in automotive AI solutions.
When comparing their business models, SoundHound AI shines with its versatile Houndify platform, launched in 2016. This innovative tool empowers brands to build conversational voice assistants, revolutionizing customer interaction—especially in restaurants with voice-activated ordering. SoundHound generates revenue through usage royalties, subscription programs, and by sharing revenue on additional services. Conversely, Cerence AI primarily targets the automotive sector, enabling voice interactions with car dashboard systems. The company serves major auto manufacturers like BMW and Ford, claiming a presence in over 500 million vehicles—essentially securing its niche in mobility AI.
Turning to financial performance, SoundHound reported an impressive 85% revenue increase in 2024, reaching $84.5 million. However, with an adjusted EBITDA loss of $61.9 million and ongoing acquisitions complicating its growth picture, the path to sustained profitability remains elusive. Cerence, facing some revenue decline, nonetheless achieved $331.5 million in fiscal 2024—12.5% more than the previous year—and reported an adjusted net income of $56.1 million.
In terms of valuation, SoundHound’s robust growth translates to a price-to-sales ratio of 37, while Cerence’s lower valuation reflects a trailing price-to-earnings ratio below 8. Yet, analysts project significant earnings drops for Cerence, pushing its forward P/E to about 60. Cerence’s recent partnership with NVIDIA invigorated investor interest, contrasting SoundHound’s struggle with competition from tech giants.
Ultimately, while SoundHound offers high growth potential, its lack of profitability poses risks amid fierce competition. In contrast, Cerence stands as a more stable investment, demonstrating profit capability and strategic partnerships that promise future growth. Therefore, Cerence emerges as a safer choice for investors seeking less risk compared to SoundHound’s speculative allure.
In the comparative landscape of SoundHound AI and Cerence AI, both companies present distinct investment opportunities within the AI domain. SoundHound’s rapid growth indicates substantial potential but carries the weight of profitability concerns and competitive pressures. Conversely, Cerence proves to be a more stable investment, showcasing profitability and established industry ties. For cautious investors, Cerence is likely the sounder choice, blending security with growth prospects. As the AI market continues to evolve, keeping an eye on developments from both innovators will be vital for potential investors.
Original Source: www.nasdaq.com
