Better Artificial Intelligence (AI) Stock: SoundHound AI vs. Palantir

Key Points

• SoundHound AI's latest results have made it clear that the company is becoming a key player in the conversational AI market.

• Palantir's growth continues to accelerate thanks to its improving customer base and higher spending by existing customers deploying its AI software platform.

• However, one of these two stocks is significantly cheaper than the other.

• 10 stocks we like better than Palantir Technologies ›

SoundHound AI (NASDAQ: SOUN) and Palantir Technologies (NASDAQ: PLTR) have been flying high on the stock market in recent months as the demand for their artificial intelligence (AI)-focused software solutions has been increasing at a nice clip.

While SoundHound AI stock has shot up more than 24% in just three months, Palantir clocked almost identical gains during this period. This impressive rally is justified, considering the healthy growth rates that these two companies are delivering. But if you have to buy one of these two high-flying AI stocks for your portfolio right now, which one should it be?

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Let's find out.

Image source: Getty Images.

The case for SoundHound AI

The demand for conversational AI solutions has been increasing rapidly. Fortune Business Insights estimates that the size of the conversational AI market could jump by five times between 2024 and 2032, generating annual revenue of over $61 billion at the end of the forecast period.

The market's robust growth will be driven by the adoption of voice AI solutions for customer service applications, with AI-powered chatbots and voice agents expected to gain traction in several industries. SoundHound AI is already capitalizing on this fast-growing opportunity. The company built a solid customer base spanning several industries such as restaurants, automotive, healthcare, and finance, among others.

The company is introducing products such as voice AI agents and vision-enabled conversational AI to improve the efficiency and productivity of its offerings. The good part is that its solutions are attracting new customers, while allowing SoundHound to win more business from existing ones.

The company reported several new customer wins in the second quarter of 2025 and also pointed out that it is successfully cross-selling its agentic voice AI platform to existing customers. As a result, SoundHound was able to more than triple its revenue in the previous quarter to just under $43 million. The company also raised its full-year guidance.

It now expects to deliver $169 million in revenue in 2025 at the midpoint of its guidance range, almost double the revenue it reported last year. However, SoundHound can do better than that thanks to the secular growth opportunity in the conversational AI market, the company's product development moves, as well as its claims that its platform is better than its peers.

SoundHound CEO Keyvan Mohajer remarked on the latest earnings conference call that its Polaris speech recognition model is 35% more accurate and four times faster than competitive models, including those offered by big tech companies. Mohajer adds that the model is cost-effective as compared to rival offerings.

So, SoundHound can keep adding new customers and benefit from increased cross-sales of its products. Throw in the company's huge backlog, and there is a good chance that it will be able to sustain its outstanding momentum for a long time.

The case for Palantir

Palantir Technologies has been witnessing a consistent acceleration in growth in recent quarters, as both commercial and government customers have been flocking toward its Artificial Intelligence Platform (AIP) to integrate generative AI into their processes.

Organizations can automate processes and speed up decision-making by fusing their operations and data with the AI tools and applications offered by Palantir. The good part is that Palantir's customers have been witnessing tangible gains thanks to AIP.

For example, Japanese insurance firm Sompo points out that its profit has improved by $60 million in the past three years thanks to AIP. It expects to achieve another $100 million in additional profit over the next three years. Meanwhile, General Mills points out that it is saving $40,000 on average each day thanks to AIP.

As such, it is easy to see why there was a 43% increase in Palantir's customer count last quarter. More importantly, the size of the deals that Palantir is signing is increasing as well. It closed 157 deals worth $1 million or more in Q2, up from 96 in the year-ago period. What's more, deals worth $10 million or more increased 55% year over year.

The combination of an improvement in Palantir's customer base and the higher spending by customers explains why its revenue increased 48% in Q2 to just over $1 billion. Moreover, the terrific growth in its revenue pipeline has led analysts to raise their expectations.

PLTR Revenue Estimates for Current Fiscal Year data by YCharts

Moreover, the company's leading position in the AI software platforms market could pave the way for impressive long-term growth, suggesting that it could remain a top AI stock in the long run.

The verdict

Palantir is a bigger AI company than SoundHound in terms of revenue. The latter's smaller revenue base explains why it is growing at a much faster pace than Palantir right now. So, investors looking for faster growth are likely to prefer SoundHound over Palantir. Another factor in SoundHound's favor is its cheaper valuation.

PLTR PS Ratio data by YCharts

SoundHound's sales multiple represents a big discount to that of Palantir. Investors, therefore, can consider buying a faster-growing AI stock at a cheaper valuation in the form of SoundHound AI right now, while those with a higher risk appetite may still be interested in Palantir, given its accelerating growth.

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