SoundHound AI and C3.ai are two emerging players in the booming AI sector. SoundHound focuses on voice-activated technology for consumers, experiencing significant revenue growth but struggling with profitability. C3.ai caters to enterprise needs, showing growth but facing challenges, particularly related to dependency on partnerships. Both have potential, but SoundHound may be the more attractive long-term investment given its strategy and outlook.
The AI sector is buzzing, with companies like SoundHound AI and C3.ai carving their own niches. SoundHound, which went public in 2022, has turned heads with its voice-activated AI tech that’s surprisingly adept at catching the intricacies of human speech. In contrast, C3.ai, which hit the market a bit earlier in 2020, offers an enterprise-level platform that weaves AI into the very fabric of company operations. As the AI market is projected to explode from a worth of $184 billion in 2024 to a staggering $826 billion by 2030, it leaves investors pondering: which stock is the smarter bet?
SoundHound has aimed to make tech approachable and enjoyable for the everyday user, focusing on voice activation. This advanced tech isn’t just for your smartphone—think smart cars and modern televisions. Major players like Stellantis, Walmart’s Vizio, and Chipotle have already hopped on board. The next big step for SoundHound is voice-enabled commerce from cars, allowing drivers to easily order food. This feature is set for release this year and promises streamlined service to hungry customers.
Wrapping up 2024, SoundHound reported a solid $84.7 million in sales—up a whopping 85% compared to last year. Looking ahead, they expect to generate between $157 and $177 million in sales this year, hinting that the good times could keep rolling. Yet, despite this growth, the company is still in the red, with a considerable net loss of $350.7 million. But there’s a shimmer of hope as management anticipates breaking even on an adjusted EBITDA basis in 2025.
Meanwhile, C3.ai is going down a different path. This company has positioned itself as a solution for organizations grappling with complex challenges, from thwarting money laundering for banks to preventing utility outages. They’ve been quite successful, notably striking agreements with the U.S. Air Force and Navy during a recent earnings call where AI had its first speaking role. C3.ai’s revenue reached $98.8 million in fiscal Q3, marking a 26% increase from the previous year.
C3.ai also projects solid growth for fiscal 2025, aiming for revenues between $383.9 million and $393.9 million, a solid leap from about $310.6 million last year. But on the downside, they, too, faced net losses totaling $80.2 million, up from a $72.6 million loss in the prior fiscal year.
With both companies shining in different areas, deciding where to sink your money isn’t straightforward. Both businesses are showing rapid revenue growth, suggesting a promising future despite being unprofitable. The price-to-sales ratio, a popular metric for placing value on stocks, paints an interesting picture. At the start of 2025, SoundHound’s ratio soared, but lately, it’s settled down; still, it remains higher than C3.ai’s, implying better value on the latter’s end.
However, there’s a catch—C3.ai relies heavily on partnerships, which puts them at risk if those partners underperform. A notable example is their agreement with Baker Hughes, ending by the end of April, with talks of renewal still lingering. The worry over these partnerships gives a bit of an edge to SoundHound, which has notably eliminated debt and is pursuing a strategy that hopes to lead to eventual profit.
In the long run, SoundHound is looking like the better bet for now, though potential investors should watch for a dip in its elevated price-to-sales ratio before diving in.
In summary, both SoundHound AI and C3.ai present unique opportunities within the booming AI market. SoundHound focuses on making technology consumer-friendly with voice activation, while C3.ai aims to tackle complex enterprise challenges. Despite their fast growth, both companies face profitability issues. However, SoundHound’s move to eliminate debt and target adjusted EBITDA profitability gives it an edge right now, despite its higher valuation. Investors should keep an eye on share price adjustments before making a decision.
Original Source: www.fool.com
