Better Artificial Intelligence Stock: Palantir vs. SoundHound AI

Artificial intelligence stocks benefited from investor fervor over the technology. Two hot stocks in this sector are Palantir Technologies (NASDAQ: PLTR) and SoundHound AI (NASDAQ: SOUN).

Palantir's shares had surged by more than 300% over the prior 12 months, while SoundHound had skyrocketed by 600%.

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Between these two stocks, is one a clearly superior investment choice to capitalize on the expanding AI market?

The case for Palantir

Palantir's business is seeing strong growth thanks to its Artificial Intelligence Platform (AIP), which it launched in 2023. "We absolutely eviscerated this quarter, driven by unrelenting AI demand that won't slow down," CEO Alex Karp said in the third-quarter earnings press release.

What makes Palantir's AIP so successful is that it goes beyond the kind of chat-based AI tool popularized by ChatGPT, which merely provides responses to human inquiries. The AIP platform goes further by employing an "AI agent," which can take action on behalf of its users.

For example, AIP improved a large insurance company's underwriting workflow from a two-week timeframe to three hours. As 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 strong client interest in AIP, Palantir experienced 30% year-over-year revenue growth to $725.5 million in the third quarter. This contributed to its Q3 net income doubling from $73.4 million in 2023 to $149.3 million in 2024. Not only that, free cash flow rose 60% to $434.5 million.

As of the end of the third quarter, the company had $768.7 million in cash and equivalents on its books, and marketable securities of $3.8 billion. This overshadowed its 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, with a substantial cash pile it can deploy on efforts to expand its business.

A look at SoundHound AI

SoundHound provides a voice AI software platform that can understand human speech in 25 languages. Its share price in the last year were fueled by a few factors.

First, in Q3, its sales soared by 89% year over year to a record $25.1 million. Second, investment bank H.C. Wainwright raised its price target on SoundHound stock from $8 to $26 in December. And lastly, it's a popular meme stock.

But these are short-term tailwinds. The question is whether SoundHound AI is a good investment for the long haul. While the stock dropped in price by 6% in the last month, it completed important acquisitions, including its $80 million purchase of Amelia AI, that strategically positioned it for long-term success.

These acquisitions enabled SoundHound to reduce its reliance on its largest customer from 72% of Q3 2023 sales down to 12% in Q3 2024. Moreover, in 2023, more than 90% of its revenue came from the automotive sector. Now, sales are more 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.

SoundHound management estimated that its 2024 revenue would be in the $82 to $85 million range, up from $45.9 million in 2023. This year, it anticipates sales will rise further to a range of $155 to $175 million.

Choosing between Palantir and SoundHound AI

Both Palantir and SoundHound AI offer reasons to invest. But when it comes to answering the question of which is the better long-term AI investment, the winner is Palantir for several reasons.

Palantir is profitable, while SoundHound booked a net loss of $21.8 million in Q3. In addition, comparing their price-to-sales (P/S) ratios suggests that 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 a company's revenue.

Data by YCharts.

While SoundHound's P/S multiple has dropped in 2025 after reaching a peak toward the end of 2024, it's still higher than Palantir's at the time of this writing. Adding to its successes, Palantir was added to the S&P 500 index last year.

Putting this all together, Palantir's successful AI Platform, strong financials, and better share price valuation make it the superior AI stock to invest in for the long run.

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Robert Izquierdo has positions in Palantir Technologies and SoundHound AI. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.