This Magnificent Artificial Intelligence (AI) Stock Has Crushed Nvidia in the Past Year. Can It Continue to Skyrocket in 2025?

Nvidia has been in magnificent form on the stock market in the past year, recording stunning gains of almost 207% as of this writing. This is thanks to the consistently strong growth in the company's top and bottom lines on account of the booming demand for its artificial intelligence (AI) chips.

However, there is another AI stock that has outshined Nvidia on the market during this period. SoundHound AI (NASDAQ: SOUN), a small company that provides voice AI solutions to enterprises, has witnessed a 256% jump in its stock price in the past year, and it is worth noting that Nvidia has played a key role in the stock's remarkable rally.

Shares of SoundHound AI received a big shot in the arm earlier in 2024 when it emerged that Nvidia held a small stake in the company. Though SoundHound stock witnessed a lot of volatility following that revelation and saw a sharp decline, it has strung together impressive gains over the past six months.

But the question is, will SoundHound AI be able to continue its red-hot rally in 2025? Let's take a look at the company's latest quarterly results and its valuation to see what the coming year might look like for this AI company.

SoundHound is growing rapidly with no signs of slowing down

SoundHound released third-quarter 2024 results on Nov. 12. The company's quarterly revenue jumped an impressive 89% year over year to $25.1 million, while non-GAAP (adjusted) net loss shrank to $0.04 per share from $0.06 per share in the same quarter last year. Consensus estimates compiled by FactSet were expecting SoundHound to post $23 million in revenue along with a loss of $0.07 per share.

The company's guidance was the icing on the cake. Though SoundHound didn't issue quarterly guidance, it did increase its revenue estimate for the full year. The company now expects to finish 2024 with $83.5 million in revenue at the midpoint of its guidance range, up from its earlier expectation of at least $80 million.

The updated revenue guidance would translate into an 82% increase in the company's top line. That would be a nice improvement over the 47% revenue growth SoundHound AI clocked in 2023, suggesting that the company's conversational AI solutions are gaining impressive traction in the market. Even better, it has released a revenue guidance range of $155 million to $175 million for 2025, suggesting that its revenue could grow at a faster pace next year and nearly double from 2024 levels.

SoundHound had earlier guided for at least $150 million in revenue for 2024. However, it has started expanding into new verticals following the recently concluded acquisition of Amelia, a company that provides conversational AI solutions to the insurance, healthcare, and finance verticals. SoundHound AI has already built a solid customer base in the automotive and quick-service restaurant (QSR) verticals, counting even Stellantis as a customer, and the good part is that it continued landing new business last quarter.

The company claims that it is providing its voice AI solutions to seven of the top 20 global QSR brands, has expanded into India to provide local language-based solutions for Kia cars, and has won a new electric vehicle (EV) client in the Middle East. All these developments explain why SoundHound AI is expecting its outstanding growth to continue next year, but is it a good idea to buy the stock right now following its stunning surge in 2024?

What does the valuation say?

SoundHound isn't profitable right now, so let's take a closer look at its price-to-sales ratio to examine its valuation. The stock is currently trading at 37 times sales, which is on the expensive side considering that Nvidia, which is a significantly larger company that dominates the AI chip market, is trading at an almost identical sales multiple and is on track to more than double its revenue this year.

Meanwhile, SoundHound stock is way more expensive when compared to the S&P 500 index's price-to-sales multiple of 3.1. At the same time, investors who are looking to buy this growth stock right now should remember that it is prone to big swings, as pointed out earlier in the article, the latest example of which could be seen in the aftermath of its earnings report.

SoundHound AI stock was down 13% on the day following its latest quarterly results. That may seem a tad surprising considering it delivered a beat-and-raise quarter. So, SoundHound stock's ability to sustain its stock market rally will depend on its ability to consistently deliver eye-popping growth and justify its expensive valuation.

Analysts, however, aren't upbeat about the stock's prospects in the coming year. The seven analysts covering SoundHound have a 12-month median price target of $7 on the stock, which points toward a 7% jump from its current stock price (as of this writing). Therefore, investors looking for a mix of value and growth may be tempted to stay away from SoundHound considering its rich multiples.

But at the same time, investors with a higher appetite for risk and looking for a red-hot AI stock may still consider buying SoundHound AI considering its terrific growth, as well as the fact that there are other, more expensive stocks that aren't growing as fast as this voice AI company but continue to benefit from the fast-growing adoption of their AI offerings.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.