Better Artificial Intelligence Stock: SoundHound AI vs. Astera Labs

The rise of artificial intelligence (AI) has unleashed a tidal wave of related businesses to consider investing in. Among these are SoundHound AI (NASDAQ: SOUN) and Astera Labs (NASDAQ: ALAB).

The former delivers voice-enabled AI that companies can make use of in customer interactions, such as taking orders at restaurant drive-thrus. The latter acts behind the scenes, providing components used in data centers.

Both are seeing strong sales growth thanks to the demand for AI-related technologies. But which looks likely to be the better long-term investment?

Image source: Getty Images.

SoundHound AI's pros and cons

Buying SoundHound shares means accepting plenty of volatility, given its beta of nearly 3. For example, last December, the stock skyrocketed to a 52-week high of $24.98, but fell back to earth in 2025, hitting a 52-week low of $6.52 on April 7 after President Donald Trump's tariff policies caused the stock market to crash.

SoundHound's share price resurgence occurred in October after investment bank H.C. Wainwright raised its price target on the stock to $26. The average target among Wall Street analysts is now $16.94.

This wild ride illustrates how AI's popularity among investors has impacted the stock, as well as the fact that the company has both strengths and shortcomings.

For instance, the AI voice expert has achieved a number of notable wins this year. In October, it announced an expanded agreement with French insurance provider Apivia Courtage, a deal that came about thanks to the impressive results delivered by SoundHound's agentic AI. In the third quarter, SoundHound's sales soared to record revenue of $42 million, a 68% year-over-year increase.

However, the company made a number of acquisitions that, while turbocharging sales, dramatically boosted its costs. Consequently, it booked a net loss of $109.3 million in the third quarter, an increase of more than 400% from its loss of $21.8 million in the prior-year period. That substantial sum, against revenue of $42 million, is concerning, although the company indicated it is working to reduce expenses.

A look into Astera Labs

Astera Labs' share price moves were more favorable for shareholders. The stock went from a 52-week low of $47.13 during the April crash to a high of $262.90 on Sept. 18.

Shares surged in September in the wake of Wall Street analyst upgrades, such as Deutsche Bank setting a price target of $200. But Astera's strong business performance justified those analyst moves.

The company generated record third-quarter revenue of $230.6 million, an impressive 104% year-over-year increase. This helped Astera achieve quarterly net income of $91.1 million, a vast improvement over its net loss of $7.6 million in the prior-year period.

That success was driven by demand for its data center components, which enable AI systems to operate with greater speed and efficiency. To further strengthen its offerings, the company is acquiring aiXscale Photonics, a German specialist in optical-glass coupling technology. That will give Astera the ability to provide the high-bandwidth, low-power solutions needed by customers as AI tech infrastructure expands to data centers the size of small cities.

Choosing between SoundHound AI and Astera Labs stock

Both SoundHound and Astera Labs have benefited from the AI megatrend. But while both companies delivered revenue increases in the third quarter, looking out over a longer time frame provides an important insight for comparing them: Astera has experienced the stronger sales growth over time.

Data by YCharts. TTM = trailing 12 months.

Adding to this is the fact that Astera is profitable. SoundHound is not: In the third quarter, it booked an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $14.5 million. However, management believes it can reach profitability on an adjusted EBITDA basis in the near future.

In terms of valuation, both companies are at about the same level when viewed through the lens of their price-to-sales ratios. This metric measures how much investors are willing to pay for every dollar of revenue produced over the trailing 12 months, and is commonly used to gauge the values of companies that are unprofitable, such as SoundHound.

Data by YCharts.

SoundHound's valuation soared early in 2025, and that contributed to its share price drop as the year progressed. Now, its valuation is more reasonable.

However, considering Astera has about the same sales multiple, yet is a profitable business with stronger revenue growth over time, it is the superior AI stock to invest in today.

Robert Izquierdo has positions in SoundHound AI. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.