Technology routinely affects nearly every part of the economy. In other words, companies that aren't traditional technology stocks can benefit from artificial intelligence (AI).
U.S. telecommunications giant AT&T (NYSE: T) is a great example. As devices and machines become more intelligent and capable, they could depend more on network communications. Meanwhile, a young, up-and-coming business like SoundHound AI (NASDAQ: SOUN) could be a big winner as it develops and carves out its share of the technology landscape over the coming years.
Although these stocks represent wildly different businesses, both performed well over the past year. SoundHound AI is up 97%, while AT&T has risen 68%. But which AI stock is better to buy now and hold for the future?
Both have pros and cons, but a winner ultimately emerged below.
Each stock could play a role in AI
AT&T is one of a few wireless networks that dominate the U.S. market. Artificial intelligence could connect more machines and devices to wireless networks, just as smartphones and personal electronics have over the past decade.
Self-driving vehicles are a great example. Each vehicle records and transmits data that helps improve the algorithms that drive them. A similar concept could apply to automated factory machinery and robotics. Data consumption on wireless networks is surging, and AI should continue that trend.
SoundHound AI is trying to become a leader in audio AI technology. Its software receives an audio query (speech), translates it into machine language, and analyzes it.
The company started primarily in the automotive industry with hands-free voice controls, but expanded into the restaurant business and has its sights set on numerous customer-facing applications. Management estimates its total addressable market at $140 billion. SoundHound AI generated $84.7 million in revenue last year and is just getting started.
AT&T may slow down, but SoundHound AI is a far riskier business
Ironically, the increased network traffic hasn't translated to growth for AT&T. The wireless business grows slowly, and analysts estimate the company will grow earnings by just 4% annually over the next three to five years.
The stock is enjoying a solid rally in the last year. AT&T right-sized its dividend and cleaned up its balance sheet after a messy decade of failed mergers and acquisitions, making AT&T stock much more appealing to investors. Today, AT&T trades at a price-to-earnings ratio (P/E) of 18, so investors shouldn't expect the stock's run to continue with such low growth.
SoundHound AI is a different story. The company's revenue grew 85% in 2024, which is impressive, even though the company's growth is still in the beginning stages. SoundHound AI, with the help of two strategic acquisitions, is guiding for $157 million to $177 million in revenue for 2025, potentially doubling last year's figure.
Still, the company comes with risks. It faces stiff competition from "Magnificent Seven" companies offering similar technology and is deeply unprofitable. It burned more cash than it generated in revenue last year.
SoundHound AI's growth is enticing at face value, but at least you can be reasonably confident that AT&T will still be around in a decade.
The better AI stock is:
For much of this decade, AT&T lagged behind the broader stock market. At a higher valuation, its slow growth could limit investment returns. Investors get a 4% dividend at the current share price, but total annualized returns will probably hover in the mid- to high-single-digit range without more growth.
SoundHound AI has risks, but the business shows promise. The company has a solid client list, including several top automotive companies, restaurant chains, and well-known brands in new markets, like Deloitte and Planet Fitness. It markets itself as an independent platform, setting itself apart from bigger competitors and appealing to companies that don't want to disclose who's powering their voice AI.
The stock is roughly 66% off its high despite the one-year performance. SoundHound AI's price-to-sales ratio (P/S) has slipped to 20 using 2025 revenue estimates. That's not cheap for an unprofitable company, but the growth is there, so the stock can grow into that valuation over time.
There's enough promise in this company for long-term investors to consider owning it as a small part of a diversified portfolio. AT&T will likely play a role in AI over the coming years but has already spent years showing investors that it may not translate to the upside they're hoping for. SoundHound AI is the better AI stock to buy and hold today.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Planet Fitness. The Motley Fool has a disclosure policy.
