Sarah Travers
As artificial intelligence (AI) continues to evolve and expand its influence across various sectors, investors are increasingly looking at AI-related stocks as valuable additions to their portfolios. Among the notable contenders in this space are Nvidia and SoundHound, each playing a distinct role in the AI revolution.
SoundHound: A Potential Growth Engine
SoundHound, though less known than some of its giant counterparts, presents an intriguing investment opportunity. With a market capitalization of approximately $1.3 billion, SoundHound is dwarfed by Nvidia’s staggering $3 trillion valuation. However, it is this size difference that underscores SoundHound’s potential for explosive growth. For SoundHound’s stock to achieve a tenfold increase, the company would only need to capture a fraction of Nvidia’s current market value—a feat far more feasible for it than for Nvidia, which would need to add an unprecedented amount of market cap to achieve similar growth percentages.
At the core of SoundHound’s appeal is its proprietary AI technology, which facilitates sound and voice recognition along with natural language understanding. This technology has broad applications, ranging from AI-powered drive-through ordering systems to interactive vehicle interfaces and smart entertainment recommendations at home. The company’s current contract backlog, valued at nearly $700 million—up from about $330 million just a year ago—highlights its growing traction and expanding market presence.
Despite its potential, SoundHound’s stock is not overly expensive, trading at 19 times sales. With an average revenue growth rate of around 60% per year, the company’s financial outlook suggests that its current premium valuation could be justified over time, especially if it maintains its growth trajectory.
Nvidia: The Established Leader
In contrast, Nvidia has little to prove when it comes to its stronghold in the AI industry. Originally known for its gaming GPUs, Nvidia has pivoted significantly, now deriving 87% of its revenue from its data center GPUs as of the first fiscal quarter of 2025. This strategic shift highlights Nvidia’s commitment to capitalizing on the growing demand for AI processing power.
Nvidia’s revenue from data center operations alone amounted to $22.6 billion in a single quarter, a stark increase from its total revenue of nearly $27 billion for all of the previous fiscal year. This growth has propelled Nvidia’s valuation from about 10 times sales to nearly 40 times sales over the past five years, supported by a 262% year-over-year revenue increase in the most recent quarter.
The Competitive Landscape and Market Risks
The AI chip market, however, is becoming increasingly competitive. Companies like AMD and Intel are beginning to challenge Nvidia’s supremacy, with new products that occasionally outperform Nvidia’s offerings on certain benchmarks. Nvidia is responding with innovations such as its next-generation Blackwell chip, aiming to maintain its competitive edge.
Investment Strategies in AI Stocks
For investors bullish on AI, both Nvidia and SoundHound offer compelling narratives but with different risk-reward profiles. Nvidia, as the larger and more established entity, offers stability and a proven track record of growth linked closely to the expansion of AI applications. Meanwhile, SoundHound offers a high-growth potential that could result in significant returns, albeit with higher volatility and associated risks.
Investors must consider their own risk tolerance and investment horizons when choosing between these stocks. Those looking for a potentially higher payoff might find SoundHound appealing, while those seeking a more dependable investment in the AI space might prefer the relative safety of Nvidia.
As AI continues to weave itself into the fabric of global technology and industry, both Nvidia and SoundHound represent valuable opportunities, each with its own merits and challenges in the fast-evolving AI landscape.
