Enhanced Artificial Intelligence Investment Option: SoundHound Intelligence versus Nvidia
Artificial intelligence (AI) is revolutionizing numerous industries, from autonomous vehicles to pharmaceutical research. Predictions indicate that AI could be worth an astounding $15.7 trillion by 2030, according to PwC estimates. Two companies leading the charge in this digital revolution are conversational AI platform provider SoundHound AI (SOUN 2.80%) and semiconductor giant Nvidia (NVDA -1.34%). Both companies have seen their shares soar within the past year, with Nvidia enjoying a 137% increase and SoundHound witnessing an awe-inspiring 730% surge.
But which AI stock emerges victorious? Let's dive deeper to unravel the secrets.
SoundHound AI's Charm
Ranking among the top players in conversational AI, SoundHound's platform boasts over 200 corporate clients. They employ it to enhance customer service and facilitate smoother device interactions. For instance, Chipotle uses SoundHound's technology to increase ease and efficiency in drive-thru and phone ordering. Meanwhile, Stellantis leverages it to incorporate voice-activated commands into their automotive brands.
SoundHound's revenues have experienced a remarkable surge, with a 89% increase in the third quarter (October 31st) to reach $25.1 million. They anticipate sales of $165 million in 2025, marking an impressive 100% increase from their projected 2024 sales of $83.5 million.
Though SoundHound relied primarily on major clients for revenue in the past, they've made considerable headway in diversification. Currently, no more than 12% of revenues originates from their largest customers. This strategy allows them to branch out into new markets, like finance, healthcare, and insurance.
Nvidia's Dominance
Nvidia has carved out a niche as the preeminent artificial intelligence semiconductor company. Their processors occupy an estimated 70% – 95% of AI data centers. This market-leading position appears unchanging, with no indication of relinquishment to competitors.
Recently, Nvidia unveiled their latest processor line, Blackwell, which has generated immense demand. Tech giants worldwide are now engaged in an AI race, investing billions to develop AI infrastructure. With Jensen Huang, Nvidia's CEO, predicting a doubling of AI data center spending over the next five years, reaching $2 trillion, their future growth seems secure.
The Trump administration's proposal for up to $500 billion in data center expenditure in the US could further fuel demand for Nvidia's processors as companies like Oracle, SoftBank, and OpenAI elaborate their AI infrastructures.
Additionally, both Nvidia's revenue and earnings are on a meteoric rise. Revenues soared 94% in the third quarter (November 27th) to $35.1 billion, and earnings skyrocketed 109% to $19.3 billion.
Nvidia Holds the Upper Hand
Without a doubt, both companies exhibit enormous potential for profitability as AI advances. But Nvidia boasts a significant advantage: it's already generating substantial profits.
Nvidia posted a staggering 200% increase in diluted earnings in the most recent quarter to $0.78 per share, while SoundHound incurred a non-GAAP net loss of $0.04 per share. Although SoundHound managed to lessen losses from the previous quarter, Nvidia's profitability remains unmatched.
Moreover, SoundHound's share price surge recently has engendered a hefty premium for its stock. The company boasts a price-to-sales ratio of 74, which outpaces competitor valuations.
On the other hand, Nvidia benefits from an attractive assortment of characteristics that appeal to AI investors. Its profitability, ample room for growth as AI investments flourish, and reasonable share price with a forward price-to-earnings ratio of 34, compared to the Nasdaq-100's 26.4, make it the more compelling choice in the AI market.
In light of SoundHound's impressive revenue growth and diversification strategies, they are venturing into new sectors like finance, healthcare, and insurance, aiming to increase their sales significantly by 2025. On the flip side, Nvidia, with its dominant market position in AI semiconductors, is seeing a surge in demand for its latest processor line, Blackwell, making it a preferred choice for tech giants investing heavily in AI infrastructure.
Given their current financial performances, Nvidia currently holds an advantage, with substantial profits and a more attractive valuation for AI investors than SoundHound, despite SoundHound's recent share price surge and diversification efforts.
