Forget SoundHound AI: This Walled-Garden Superpower Is the Safer, Smarter Way to Profit From Voice AI

SoundHound AI (NASDAQ: SOUN), a developer of audio and speech recognition tools, grew rapidly in recent years as more companies launched their own AI-powered voice services. Its namesake app can identify songs from just a few seconds of recorded audio or a few hummed bars. Still, it generates most of its revenue from Houndify -- a developer platform for creating customized voice recognition apps that aren't tethered to big tech companies.

SoundHound already serves automakers like Stellantis, quick-serve restaurants like Chipotle, and credit card giants like Mastercard. Over the past two years, it acquired the AI restaurant services provider SYNQ3, the online food ordering platform Allset, the conversational AI company Amelia, and the customer service AI company Interactions to increase its exposure to the restaurant and AI chatbot industries.

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From 2020 to 2024, SoundHound's revenue grew at a CAGR of 60%. From 2024 to 2027, analysts expect its revenue to grow at a 49% CAGR to $283 million, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) turning positive in the final year.

That makes SoundHound one of the market's fastest-growing AI stocks, but it's also valued accordingly. With a market capitalization of $4.18 billion, it trades at 18 times its 2026 sales. It's also increasingly dependent on acquisitions to offset its slowing organic growth, and its gross margins are declining. It's expected to remain unprofitable under generally accepted accounting principles (GAAP) through 2027. It's also more than doubled its outstanding share count since it went public via a merger with a special purpose acquisition company (SPAC) in April 2022. That dilution will likely continue for the foreseeable future.

In other words, SoundHound hasn't yet proven its business model is sustainable. So instead of chasing this volatile stock in this choppy market, it might be smarter to simply stick with Apple (NASDAQ: AAPL) as a safer way to profit from the growth of the voice AI market.

Why is Apple a safer and smarter bet on the voice AI market?

Apple might not initially seem like a voice AI company, since it generates most of its revenue from its hardware products. In fiscal 2025 (which ended last September), it generated 50% of its revenue from the iPhone, 8% from the Mac, and 7% from the iPad. Another 9% came from its wearables, home devices, and accessories. The remaining 26% came from its services -- including its App Store, iCloud, Apple TV, and other subscription-based services.

Apple also doesn't actively monetize Siri, the voice assistant, which it launched in 2011. Instead, it acts as the voice-activated gatekeeper to the company's sprawling services -- which weave through its iPhones, iPads, Macs, Watches, Apple TVs, and other devices.

Unlike other cloud-based voice AI services, Siri can process many of its commands locally on its devices. That feature speeds up its voice queries, keeps users' data private, and reduces Apple's cloud infrastructure costs. Apple also develops its own "Neural Engine" chips to process those tasks more efficiently, and it's been gradually upgrading Siri's own large language model (LLM) to improve its conversational AI capabilities.

Siri doesn't need to make money for Apple. It merely keeps its customers locked into its software ecosystem through its devices -- which are closed off in a "walled garden" that makes it difficult to switch to Android or Windows-powered devices.

By locking its customers into that ecosystem, it ensures it can continue selling more iPhones, Macs, and iPads while expanding into new markets like connected cars and mixed-reality devices. It will also complement its rollout of more gesture-based and eye-tracking services.

From fiscal 2021 to fiscal 2025, Apple's revenue and earnings per share (EPS) grew at CAGRs of 3% and 7%, respectively. Those growth rates might seem anemic compared to SoundHound's, but Apple's prisoner-taking business model is more sustainable. It also bought back 12% of its shares over the past five years.

From fiscal 2025 to fiscal 2028, Wall Street expects its revenue and EPS to grow at CAGRs of 7% and 11%, respectively, driven by the next iPhone upgrade cycle, the growth of its services ecosystem, and the increasing stickiness of its Siri-powered "Apple Intelligence" features. Its stock still looks reasonably valued at 28 times next year's earnings, and it should deliver more reliable gains than SoundHound AI and other smaller AI plays for the foreseeable future.

Leo Sun has positions in Apple. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Mastercard, and SoundHound AI. The Motley Fool recommends Stellantis and recommends the following options: short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.