Should You Consider SoundHound AI Over Palantir as a Millionaire-Maker Stock?

Palantir (NASDAQ: PLTR) has emerged as one of the most talked-about stocks on Wall Street. Its stock has soared over 300% in 2024, securing its spot as one of the top-performing stocks in the market. Consequently, many investors are questioning whether this stock represents the best AI investment available today. However, I propose that there may be a more promising AI company worth considering, one with superior growth potential compared to Palantir.

SoundHound AI (NASDAQ: SOUN) is often highlighted as a potential AI millionaire-maker. But can it surpass Palantir in performance? Let’s delve into the comparison.

The Case for SoundHound AI as a Key Investment

In assessing whether these stocks could make you a millionaire, it's essential to acknowledge that significant growth would be required. Let's start with a hypothetical $10,000 investment. For Palantir to turn that into $1 million, it would need to increase in value by 100 times, reaching an astonishing market cap of $15.9 trillion. In contrast, SoundHound AI would only need to reach a valuation of $375 billion to achieve the same million-dollar outcome.

Thus, a more effective way to evaluate these companies is through their potential for growth beyond the broader market, giving you a faster pathway to accumulating wealth.

Both Palantir and SoundHound AI are deeply involved in the AI sector. Palantir focuses on creating tailored applications for businesses to utilize AI, equipping decision-makers with the most current information. The company is also actively integrating generative AI into various workflows, ensuring that AI becomes an integral aspect of their operations.

On the other hand, SoundHound’s software leverages audio inputs, fitting them into AI models to help various sectors such as automotive, restaurants, and financial services automate tasks usually performed by humans. SoundHound has diversified its clientele impressively, with no single client topping 12% of its revenue; its largest sector accounts for just 25%.

One significant advantage that SoundHound holds over Palantir is its faster growth rate. In the third quarter, SoundHound's revenue skyrocketed by 89% year-over-year, totaling $25.1 million. The company expects tremendous growth in 2025, anticipating a doubling of its revenue from 2024. In comparison, Palantir also showed good results, but not at the same pace. Its revenue rose 30% year-over-year to $726 million, which is nearly 30 times what SoundHound generated. However, Wall Street analysts project Palantir’s revenue growth to slow to around 24% next year.

As companies expand, maintaining rapid growth becomes increasingly challenging, which explains why the smaller SoundHound is outpacing Palantir.

Valuation Concerns for Both Stocks

It's essential to consider the valuation of both companies as you evaluate your investment. High expectations and potential typically lead to higher stock prices. Analyzing the price-to-sales (P/S) ratio, both Palantir and SoundHound are currently trading at elevated valuations.

Palantir's P/S ratio stands at 64.5, while SoundHound’s sits at 40.5. This indicates the market holds high expectations for both companies, potentially leading to perceptions of them being overvalued.

It is perplexing that Palantir, which is growing at a significantly slower rate than SoundHound, commands a 50% higher valuation premium.

Assuming both companies meet Wall Street’s 2025 projections, SoundHound will likely trade at about 20 times sales, compared to Palantir, which could have a P/S ratio of around 47. While a 20 times sales valuation for SoundHound may be justifiable, Palantir's 46.5 appears excessive.

In conclusion, when comparing these two AI stocks, SoundHound emerges as the more attractive investment option. Nevertheless, potential investors should be cognizant of the heightened risks associated with both companies.

investment, AI, stocks