Artificial intelligence stocks have benefited from investor fervor over the technology. Two hot stocks in this sector are Palantir Technologies (PLTR -1.42%) and SoundHound AI (SOUN -6.19%).
Palantir's shares surged over 300% in the past 12 months through the week ending January 10, while SoundHound's stock skyrocketed nearly 700% over the same time period.
Between these two popular stocks, is one a clear investment choice to capitalize on the expanding AI market? Here's an examination of both companies to answer that question.
The case for Palantir
Palantir's business is seeing strong growth thanks to its artificial intelligence platform (AIP), which launched in 2023. CEO Alex Karp described the firm's success in the third quarter of 2024 by declaring, "We absolutely eviscerated this quarter, driven by unrelenting AI demand that won't slow down."
What makes Palantir's AIP so successful is that it goes beyond the kind of AI chat-based tool popularized by ChatGPT, which merely provides responses to human inquiries. The AIP platform goes further by employing what's called an AI agent. This agent can take action on behalf of a business.
For example, AIP improved a large insurance company's underwriting workflow from a two-week timeframe to three hours. CTO Shyam Sankar noted, "This only strengthens our conviction that the value is in the application and workflow layer, which is where we excel."
As a result of AIP's effectiveness, Palantir experienced 30% year-over-year revenue growth to $725.5 million in the third quarter. This contributed to Q3 net income doubling from $73.4 million in 2023 to $149.3 million in 2024. Not only that, free cash flow (FCF) rose 60% year over year to $434.5 million.
Exiting Q3, the company possessed a massive $768.7 million in cash and equivalents, and marketable securities of $3.8 billion. This alone overshadowed Q3 total liabilities of $1.2 billion. When you consider Palantir's total assets of $5.8 billion, the company is in an outstanding financial position, capable of using its substantial cash pile to expand its business.
A look at SoundHound AI
SoundHound provides a voice AI software platform that can understand human speech in 25 languages. The firm's share price boost in recent weeks was fueled by a few factors.
First, its Q3 sales soared 89% year over year to a record $25.1 million. Second, investment bank H.C. Wainwright raised SoundHound's price target to $26 in December. And lastly, it's a popular meme stock.
But these are short-term factors affecting its share price. The key question is whether SoundHound is a good AI investment for the long haul. Over the past year, the company executed important acquisitions that strategically positioned it for long-term success.
These acquisitions enabled SoundHound to reduce its reliance on a single large customer from 72% of Q3 sales in 2023 down to 12% in 2024. Moreover, the firm's revenue, of which over 90% came from the automotive sector in 2023, is now diversified across multiple industries, including restaurants and financial services.
SoundHound's balance sheet is also excellent. Its Q3 assets totaled $499.7 million, with $135.6 million in cash and equivalents, versus total liabilities of $203.7 million.
The company expects sales growth to continue. SoundHound estimates 2024 revenue to come in between $82 to $85 million, up from $45.9 million in 2023. This year, it anticipates sales to rise further to a range of $155 to $175 million.
Choosing between Palantir and SoundHound AI
As you can see, when it comes to artificial intelligence, both Palantir and SoundHound AI offer reasons to invest. But in deciding which is the better long-term AI investment, the winner is Palantir for several reasons.
Palantir is profitable, while SoundHound exited Q3 with a net loss of $21.8 million. In addition, looking at the price-to-sales (P/S) ratio for each suggests Palantir's stock is the better value. The P/S ratio tells you how much investors are willing to pay for a dollar's worth of revenue.
Data by YCharts.
While SoundHound's P/S multiple dropped in 2025 after reaching a peak towards the end of 2024, it’s still higher than Palantir's at the time of this writing.
Adding to this, Palantir joined the S&P 500 Index last year. The company's successful AI platform, strong financials, and better share price valuation make it the superior AI stock over SoundHound to invest in for the long run.
