Photo credit: www.fool.com
The landscape of artificial intelligence has witnessed the emergence of numerous AI-focused firms in recent years. Notable among these are SoundHound AI (SOUN -2.31%), which made its public debut in 2022, and C3.ai (AI -0.71%), which launched its initial public offering in late 2020.
SoundHound has created a voice-activated AI capable of understanding human speech with remarkable accuracy. In parallel, C3.ai offers an integrated enterprise platform that includes both off-the-shelf and customized AI software for businesses. As the AI market is projected to expand from $184 billion in 2024 to $826 billion by 2030, both companies seem poised to capitalize on this growth.
This prompts the question: which company, SoundHound or C3.ai, presents a more attractive investment opportunity in the AI sector? A detailed examination of each entity is required.
SoundHound’s AI Advancements
SoundHound aims to simplify technology interaction for consumers, emphasizing voice-activated interfaces. Their AI technology is integrated into various consumer devices, including automobiles, televisions, and fast-food drive-thrus, facilitating actions such as placing food orders. Clients include industry giants like Stellantis, Walmart-owned Vizio, and Chipotle Mexican Grill.
Looking forward, SoundHound is set to introduce voice-enabled commerce for vehicles in the coming year, allowing drivers to place food orders via its AI agent while determining convenient pickup spots.
At the conclusion of 2024, SoundHound reported zero debt and sales totaling $84.7 million, representing an impressive 85% year-over-year growth. The company anticipates continuing this upward trend, projecting revenues between $157 million and $177 million for 2025, potentially repeating or surpassing the previous year’s growth.
Despite this revenue surge, SoundHound has not achieved profitability, ending 2024 with a net loss of $350.7 million. However, management is optimistic about reaching adjusted EBITDA profitability in 2025, having recorded an adjusted EBITDA loss of $61.9 million by year’s end.
C3.ai’s Growth Strategy
In contrast to SoundHound’s focus on consumer engagement, C3.ai develops a sophisticated platform designed to tackle complex challenges faced by organizations. Their AI is employed to assist financial institutions in detecting money laundering and enable utility companies to identify equipment malfunctions proactively.
Recently, C3.ai highlighted its fiscal third-quarter achievements, concluding on January 31, where the company reported securing agreements with the U.S. Air Force and Navy. Notably, this was the first instance where AI contributed to an earnings call, marking a milestone for the company, as noted by C3.ai.
C3.ai’s clientele includes the U.S. Department of Defense, ExxonMobil, and the New York Power Authority. To further bolster sales, C3.ai has established partnerships with technology leaders such as Microsoft and Amazon.
This strategy has driven C3.ai’s fiscal Q3 revenue to $98.8 million, marking a 26% increase compared to the previous year. The company expects to finish fiscal 2025 with revenues ranging from $383.9 million to $393.9 million, indicating strong growth from $310.6 million in fiscal 2024.
However, like SoundHound, C3.ai is yet to achieve profitability, reporting a net loss of $80.2 million in fiscal Q3, compared to a loss of $72.6 million during the same period last year.
Evaluating Investment Potential: SoundHound vs. C3.ai
Deciding between an investment in SoundHound or C3.ai presents challenges, as each company possesses distinct strengths within the AI landscape, making either a potentially attractive choice for investors.
Though both companies are currently unprofitable, the rapid growth of technology firms often requires prioritizing expansion over short-term profits. The impressive year-over-year revenue growth for both suggests their strategies are yielding positive results.
An important consideration in evaluating these investments is their stock valuation. Comparing the price-to-sales (P/S) ratios sheds light on investor sentiment regarding the revenue generated by each company.
Initially, SoundHound’s P/S ratio was elevated at the start of 2025 but has since declined. Nevertheless, it remains significantly higher than that of C3.ai, indicating that C3.ai may present better value at this moment.
That said, C3.ai’s reliance on partnerships carries certain risks, as its revenue can be adversely affected by the performance of its partners. For instance, its partnership with Baker Hughes is set to expire at the end of April, with no renewal guaranteed at the current time.
This unpredictability regarding C3.ai’s partner network is one factor lending itself to a preference for SoundHound as a more favorable AI investment right now. Additionally, SoundHound has maintained fiscal responsibility by eliminating debt, and its goal of reaching adjusted EBITDA profitability by this year signifies a commitment to achieving a positive financial outcome.
For these reasons, SoundHound appears to be the more advantageous investment in the AI sector for the long term. However, as SoundHound’s price-to-sales ratio remains elevated, potential investors may want to wait for a drop in share price before making a purchasing decision.
Source
www.fool.com