SoundHound AI and Palantir Technologies are making their marks in the AI arena. SoundHound specializes in audio recognition but struggles with high valuations and lack of profits. Meanwhile, Palantir, offering data mining solutions, trades at lofty prices but shows strong growth and recent profitability. Investors may want to lean toward Palantir, albeit cautiously, in an unpredictable market.
In the fast-paced world of artificial intelligence, two companies are vying for attention: SoundHound AI (SOUN) and Palantir Technologies (PLTR). SoundHound specializes in voice and audio recognition tools, while Palantir favors data mining services aimed at helping both government agencies and large corporations make quick, informed decisions. The landscape is getting intense as these players maneuver through the rapidly expanding AI market.
SoundHound made its debut through a SPAC merger on April 28, 2022, launching its stock at $8.72. Meanwhile, Palantir opted for a direct listing on September 30, 2020, starting at $10. Currently, SoundHound’s stock is hovering just under $10, but Palantir has seen dramatic growth, with shares shooting up to nearly $115. The question that looms now is how did Palantir outrun SoundHound so dramatically, and is it still the smarter bet for investors?
SoundHound’s situation is a bit tricky. The app, known for identifying tunes from brief clips or hums, thrives on Houndify—a platform that enables companies to develop custom AI applications. Clients range from automakers like Hyundai to fast-food giants like Church’s Chicken. Plus, Nvidia has woven Houndify into its Drive system for vehicles.
In terms of numbers, SoundHound’s revenue jumped 47% in 2022 and projected 85% growth for 2024. Acquisitions, such as Synq3 and online food-ordering service Allset, helped spur this surge. Despite optimism on revenue hitting $166 million, the company faces challenges, such as high valuations and ongoing unprofitability. Its market cap of $3.9 billion translates to 23 times its projected sales for the year, and accompanied by issues like a recent 10-day filing delay, investors are left wondering if it can justify that price tag.
Switching gears to Palantir, it boasts two main platforms: Gotham and Foundry. Gotham caters mostly to U.S. government agencies, while Foundry aids large corporations like Morgan Stanley and Airbus. Integrated AI tools are its forte, allowing users to create custom applications.
Palantir’s revenue climbed 24% in 2022 and 17% in 2023, even as macroeconomic pressures squeezed its corporate clients. Despite this, they turned a profit in 2023 by cutting costs, and revenue surged again in 2024 by 29%, thanks to a recovery in commercial business and an uptick in government contracts. That robustness in the U.S. market led to Palmer’s inclusion in both the S&P 500 and Nasdaq-100 last quarter.
But things aren’t all rosy. Analysts expect impressive growth, with revenue projected to shoot up 31% in 2025, yet Palantir’s trading at dizzying valuations—213 times its forward adjusted earnings and 72 times this year’s sales. Any negative developments, whether from government spending cuts or tariffs hitting clients, could shake up those numbers significantly.
So, where should investors turn their gaze now? To be honest, it’s hard to back either stock with confidence. SoundHound is clearly on the moving train of expansion, but its reliance on acquisitions and ongoing lack of profit raises some red flags about sustainability. On the other hand, while Palantir seems healthier overall, it’s riding high on valuations that feel a bit inflated. If I had to choose, I’d edge toward Palantir. I wouldn’t pour all my cash into it right away, but I might consider a gradual investment strategy over time as the market evolves. SoundHound still seems a bit risky for long-term growth right now.
In summary, both SoundHound AI and Palantir Technologies are making waves in the AI landscape. SoundHound faces hurdles with high valuations and needs to establish sustainable profitability. Palantir, while appearing more stable and profitable, is trading at steep valuations that could be precarious in the face of adverse market conditions. As of now, Palantir seems the safer bet, though cautious approaches to investment are warranted in this volatile market.
Original Source: www.fool.com