Better Artificial Intelligence Stock: Palantir vs. SoundHound AI

Despite the market's recent volatility, artificial intelligence (AI) continues to be a driving theme on Wall Street. In fact, AI has the potential to be one of the most important technological innovations of our generation.

There are numerous ways to invest in AI, and within that space, the growth of the AI software platform niche is still in its early days. Two companies showing some of the most promise on this front are Palantir Technologies (NASDAQ: PLTR) and SoundHound AI (NASDAQ: SOUN).

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AI leaders

While both Palantir and SoundHound are emerging AI software companies, their businesses are quite different. Palantir is a data-gathering and analytics company that got its start by helping U.S. intelligence and defense agencies with mission-critical tasks.

Within the government sector, its software is used for such things as helping fight terrorism by recognizing difficult-to-discern patterns in big data sets. Its solutions are also used on the battlefield. Palantir's AIP integrates data from diverse sources to provide commanders with real-time movement tracking, help them visualize asset positions, and support their strategic decision-making with AI-driven recommendations.

The company has since branched out to the commercial sector, where it uses its AI platform to help customers identify and solve real-world problems in their businesses. It has focused on the application and workflow software layers, where it gathers data from different sources and structures it into an "ontology," connecting data to real-world objects and processes.

Palantir does not have its own AI models -- instead, it lets customers import models into its secure platform so that they can be used in their operational processes to not only give actionable insights but also execute actions.

For example, its platform can be used for such tasks as supply chain optimization. It can collect data from various sources into a single integrated view; simulate different scenarios; propose an action such as finding an alternative supplier; recommend alternate suppliers based on criteria like lead times and price; and then help predict future supply chain risks before they happen.

SoundHound AI, on the other hand, is a voice-interface company. Its platform uses speech-to-meaning and deep-meaning-understanding technology to process speech in real time and ascertain a user's intent, while providing a more conversational tone in its replies as it answers complex questions.

Its revenue model is based on a combination of royalties and subscription payments. For physical products into which its solutions are embedded, it receives royalties that can be based on things such as usage, unit sales, or transactions. Meanwhile, for more service-based businesses, its solutions are generally sold via subscriptions.

SoundHound has made initial strong inroads into the automotive and restaurant industries. It provides in-vehicle voice assistants to several automobile brands, and it has a number of restaurant-based solutions, including smart ordering, employee assistance, and drive-thru solutions. With its acquisition of enterprise AI voice company Amelia last year, it has expanded into the healthcare, retail, and financial service industries as well.

Image source: Getty Images

Growth and opportunities

Both Palantir and SoundHound have been generating strong revenue growth. Palantir's revenue rose by 36% in Q4, while SoundHound's revenue soared by 101%, though that was off a much smaller base and was also boosted by the Amelia acquisition. For 2025, Palantir is guiding for revenue growth of about 31%, while SoundHound forecasts that its revenue will approximately double.

Palantir has been experiencing significant sales growth with U.S. commercial customers, but this is merely the tip of the iceberg. A major factor is that much of its early work with new customers involves proof-of-concept solutions, presenting a substantial revenue opportunity as it transitions these customers to wider use of its solutions. The company has also been expanding its relationship with the U.S. government. Additionally, it recently secured a major contract with NATO.

SoundHound, meanwhile, has a significant opportunity to become a leading voice commerce company, offering solutions across industries. It is leveraging AI agents to drive its next phase of growth, enabling its software to handle complex, industry-specific tasks. For example, it can assist a patient who has called a medical practice by identifying the right specialist for them to see, collecting insurance information, and scheduling an appointment.

Which stock is the better buy?

Both Palantir and SoundHound trade at premium forward price-to-sales multiples. However, Palantir's multiple is more than three times that of SoundHound, despite the latter's much faster revenue growth.

PLTR PS Ratio (Forward) data by YCharts.

That said, I think Palantir likely has the much bigger market opportunity over the long term. Its solutions are also much more complex, and it faces less competition. So between the two, I'd lean toward Palantir, despite its higher valuation.

However, both stocks are more on the speculative side given their valuations, so if you choose to open a position in either of them, I'd suggest keeping its sizing within your portfolio on the smaller size.

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Geoffrey Seiler 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.