Key Points

• If quantum computing takes off in the next decade, IonQ could be a big winner.

• SoundHound is a company that has shown its ability to adapt, and it could become a big winner in agentic AI.

• Palantir has the potential to become one of the largest AI companies in the world.

• 10 stocks we like better than IonQ ›

If you're looking to invest in potential millionaire-making tech stocks, you're sometimes going to have to swing for the fences. The three stocks below are bold bets on companies chasing massive markets with long runways. You're not buying these stocks looking for modest returns; you're buying them because you see a shot at something transformational.

That said, these are high-risk, high-potential-reward stocks. None of their valuations are cheap, and most are still just starting to scratch the surface of their potential. But if the technologies deliver and management teams execute, the upside could be enormous.

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IonQ

Quantum computing company IonQ (NYSE: IONQ) isn't just an academic lab with a bunch of theoretical physics testing hypotheses, like the characters on the TV show "The Big Bang Theory." It's building real quantum computers that are already being tested in commercial, government, and academic settings. IonQ is working to build fault-tolerant systems that can operate at scale, which is the holy grail in quantum computing. Without that reliability, this emerging technology won't move beyond the lab.

The company has made solid early progress. It's working with AstraZeneca, Amazon, and Nvidia on early use cases, and it has a strong balance sheet with around $700 million in cash and investments and zero debt. That gives it time and room to invest without constantly going to the market for funding.

IonQ also opened a 65,000 square foot facility in Washington to manufacture systems in-house. That's another sign that this isn't just a science project anymore and that the company is gearing up to deliver working machines.

The company has also been acquiring smaller quantum computing players to help bolster its capabilities. That's a smart move in a burgeoning field where technical talent and intellectual property are key.

There's still a long road ahead, but if quantum computing takes off in the next decade, IonQ is positioned to be one of the companies that could be a huge winner.

SoundHound AI

While SoundHound AI (NASDAQ: SOUN) is still a relatively young company, it has consistently been able to adapt in an ever-evolving tech landscape. That's something great tech companies do.

A leader in "speech-to-meaning" and "deep meaning understanding" technology, the company acquired Amelia last year to add its advanced conversational intelligence to its platform. It's now taking this combined technology and applying it to create voice-first artificial intelligence (AI) agents that can go out and complete tasks without the need for human intervention.

By merging its voice technology with Amelia's enterprise software, SoundHound now has a complete voice automation platform. SoundHound has been strong in the automobile and restaurant industries, while Amelia brought with it expertise in the medical and financial verticals, which have their own nuances and specific industry jargon. It's also used Amelia's technology as part of the foundation for its AI agent ambitions. With the recent rollout of its Amelia 7.0 platform, it's now moved beyond being simply an AI voice company to being a voice-first agentic AI company.

This is still a small company with something to prove, but the product roadmap and customer traction suggest it's heading in the right direction. And as I said at the beginning, it has been quick to adapt. The company actually started out as a platform for discovering music, where it would then direct customers to online music stores. It's come a long way since those early days, and the future looks bright.

Palantir

Palantir Technologies (NASDAQ: PLTR) is the largest company on this list and the one with the clearest momentum. Originally formed to help fight terrorism after 9/11, the data gathering and analytics company has been a key government vendor for years. However, it has successfully expanded into the commercial sector, where its AI platform (AIP) has become a central tool for helping organizations implement AI in the real world.

Most businesses don't lack data -- they lack the tools to do anything meaningful with it. Palantir helps organizations gather data from a wide variety of sources and then structure it into an ontology that links the data to their real-world counterparts. The ontology provides clean, structured data that helps AI models operate more effectively. Customers can then apply whatever AI models they want with this ontology to identify real-world problems and then go out and solve them.

AIP has been a hit with commercial customers. In Q1, its U.S. commercial revenue grew 71%, and commercial deal value more than doubled. Best of all, most of these deals are in their early stages, and Palantir has a big opportunity not just to add more customers, but to grow significantly within its existing customer base.

The stock's valuation is steep, no question. However, given the breadth of use cases across industries for which AIP can be used, the company has the potential to become one of the largest AI companies in the world in the future.

Should you invest $1,000 in IonQ right now?

Before you buy stock in IonQ, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and IonQ wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,064,820!*

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*Stock Advisor returns as of July 29, 2025

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia, and Palantir Technologies. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.

Soundhound AI (NASDAQ: SOUN) is scheduled to report quarterly financial results that could have huge implications for shareholders.

*Stock prices used were the afternoon prices of July 29, 2025. The video was published on July 31, 2025.

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Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $625,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,090,257!*

Now, it’s worth noting Stock Advisor’s total average return is 1,036% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of July 29, 2025

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Key Points

• SoundHound AI is a leader in AI audio recognition.

• The company's revenue increased at a jaw-dropping 151% pace in Q1.

• Management indicated that significant growth remains.

• 10 stocks we like better than SoundHound AI ›

SoundHound AI (NASDAQ: SOUN) has been a poor investment in 2025, following a tremendous 2024. It's down 35% this year, compared to soaring 835% last year. However, I think a turnaround for SoundHound AI could be on the way.

SoundHound AI has some strong tailwinds blowing in its favor, and it could be a monster winner in the second half of the year, especially if the growth figures that management projects come true.

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SoundHound AI is putting up impressive growth figures

SoundHound AI is a leader in audio recognition technology, using this information to integrate with generative AI models. Voice-activated AI models have been around for a long time (think Siri or Alexa), but often frustrated users. SoundHound AI's product represents a significant improvement over these technologies, outperforming human counterparts in both accuracy and speed.

More people might be open to using AI to replace many aspects of their lives if it meant a quicker and more seamless experience, but that hasn't often been the case. As a result, the general population may be somewhat skeptical of SoundHound's product, but its rapid growth tells a different story.

In the first quarter, SoundHound AI's revenue rose an impressive 151% year over year to $29.1 million. Management also maintained its full-year guidance of 97% year-over-year growth, which places its growth rate among the fastest in the AI realm. However, it's unusual to see a stock delivering that level of results with a declining share price. That could be because investors are concerned that too much growth is already priced into the stock.

SoundHound AI's stock isn't cheap. It trades for 41 times sales.

SOUN PS Ratio data by YCharts. PS = price-to-sales.

This level is well below where it peaked at the end of 2024, but also above where it traded throughout most of 2024. Still, 41 times sales could be a reasonable price to pay for the stock -- if it can maintain its near-100% revenue growth pace (which is incredibly difficult to do).

If SoundHound AI can maintain its doubling growth pace, the stock will be valued at around 20 times sales after one year of growth, which is the high mark for most software companies. I think that SoundHound AI can deliver strong growth in the second half of 2025 and throughout 2026, especially if it starts to convert some of its backlog.

Management could reveal what its expecting in 2026 soon

At the end of 2024, SoundHound AI's revenue backlog (a measure of how much value remains on contracts that it has signed) was $1.2 billion. Since SoundHound AI's trailing 12-month revenue just eclipsed $100 million, this indicates monster growth ahead for the company.

While management was unwilling to change its 2025 guidance during Q1, there are clear signs that SoundHound AI's 2026 growth could be just as strong as its 2025 growth. The market isn't ready for this proposition, and if management hints that 2026 growth will be just as rapid as 2025's, the stock could surge as a result.

We don't have a date for SoundHound AI's second-quarter results, but last year's Q2 results were available in early August. I'll be watching SoundHound AI's stock during that timeframe and paying close attention to what management has to say about 2026. They dropped hints regarding 2025's projections during the Q2 2024 conference call, and I expect them to do the same this year.

SoundHound AI's audio recognition product is being widely adopted, with many companies having already signed a deal with SoundHound. Now, SoundHound AI is working to recognize that revenue, which could result in significant growth for both the company and its stock.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,056,790!*

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*Stock Advisor returns as of July 15, 2025

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Key Points

• There is a massive market opportunity in conversational intelligence.

• SoundHound AI is winning customers and growing revenue rapidly.

• Investors could make tremendous returns over the next few years.

• 10 stocks we like better than SoundHound AI ›

If you haven't used them yet, you probably will soon. They communicate with you conversationally, take orders, solve customer service issues, and respond to detailed queries. But they aren't human.

I'm talking about AI-powered voice-recognition systems that are popping up across multiple industries, such as restaurants (drive-thru, in-person, and phone ordering), automotive, call centers, smart devices, and others. Statista pegs the addressable market as $8.6 billion this year and nearly doubling by 2030 to $15.9 billion.

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The adoption is likely to be rapid as the technology is perfected. There is simply too much cost savings for companies not to use it. This is the first reason SoundHound AI (NASDAQ: SOUN) could be ready for a massive bull run: tremendous market opportunity.

Major customer wins

SoundHound operates mainly on a recurring revenue model. Customers pay royalties based on usage, per device, or through subscription services, where the payment is made monthly, based on usage or the number of interactions. This is a terrific model. Recurring revenue makes sales and cash flow more predictable and increases the lifetime value of each customer. That is, once SoundHound wins a customer, it will continue to receive revenue until the customer cancels the contract.

And SoundHound is winning customers hand over fist. Plus, it is expanding relationships with current customers who tried the technology and want to expand it to thousands more locations. For instance, SoundHound reported expansions with Firehouse Subs, Five Guys, White Castle, and other food brands, as well as healthcare, retail, and other customers in its last earnings release. Its customer list is impressive and growing, as shown below.

Gaining customers is the company's No. 1 job right now to feed its recurring revenue model -- and so its recent success is the second reason the stock could catch fire soon.

Financial growth and valuation

The third reason is financial. The stock price is down while revenue is skyrocketing. The stock got ahead of the company's results in 2024. It was up over 1,000% during the year at one point. The price-to-sales ratio hit 110. Once the momentum turned in 2025, the stock price fell nearly 70% and is still more than 50% off its 2024 high. But fortunes are turning.

SoundHound reported a massive 151% year-over-year increase in sales in the first quarter of 2025, hitting $29 million. It also finished with $246 million in cash and no long-term debt. The company isn't profitable yet, but this isn't unusual for a fast-growing tech upstart focusing on investing in its technology and building its customer base.

The result of the stock price crash and revenue ramp is a more attractive valuation. The price-to-sales ratio is now 42, which is still expensive; however, look what happens to it on a forward basis:

SOUN PS Ratio data by YCharts

The stock market is forward-looking investors buying companies based on what they expect in the future. SoundHound stock's price-to-sales ratio has fallen quickly to 29, based on revenue estimates for 2025, and is expected to fall further to 22 based on next year's sales. This also assumes that SoundHound will hit the low end of its revenue guidance in 2025; the company is predicting $157 million to $177 million. This would push the forward price-to-sales ratio down even further.

Suffice it to say, revenue is soaring, and the valuation is getting more and more attractive, which could lead to massive gains for investors over the next few years.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

Now, it’s worth noting Stock Advisor’s total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of July 15, 2025

Bradley Guichard has the following options: long January 2027 $20 calls on SoundHound AI. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

BigBear.ai (NYSE: BBAI) and SoundHoundAI (NASDAQ: SOUN) are two of the most popular artificial intelligence stocks right now.

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*Stock prices used were the afternoon prices of July 7, 2025. The video was published on July 9, 2025.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,048%* — a market-crushing outperformance compared to 179% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

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*Stock Advisor returns as of July 7, 2025

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Key Points

• SoundHound AI offers integrated and proprietary AI solutions for more than 25 languages.

• It has huge global opportunities in the automotive and restaurant sectors.

• It is diversifying into other industries with different monetisation strategies.

SoundHound AI (NASDAQ: SOUN) might not enjoy the same hype as Nvidia or Palantir in the stock market, but this mid-cap voice AI company is quietly expanding its footprint across the globe. In doing so, it may be building something far bigger than most investors currently realize.

While SoundHound AI is best known for powering restaurant drive-thrus and car infotainment systems, there's far more to its growth story. From Asia to Latin America, it's tapping into one of the most significant, overlooked opportunities in AI: the shift to voice as the primary human-machine interface.

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A multilingual AI voice platform

Among the most powerful yet underrated assets SoundHound AI has are its integrated and proprietary solutions for more than 25 languages. That's more than just a technical feat. In global markets, offering a voice AI interface that functions properly in native languages is a must-have. English-only won't cut it.

As companies continue to integrate AI into new physical systems, from vehicles to smart appliances, the ability to manage local language and cultural nuances will become a significant competitive advantage. That's precisely why SoundHound has been winning new contracts and partnerships.

In the first quarter of 2025, it partnered with Chinese tech giant Tencent to expand its footprint in the global auto market, building on its existing relationships in the industry with manufacturers such as Hyundai, Kia, Stellantis, and Samsung's Harman division.

SoundHound AI also renewed contracts with two Japanese multinational companies that offer services across numerous industries, and it signed a deal to provide a major Latin American resort developer with an AI agent concierge.

These partnerships point to something bigger: Demand for AI-powered voice interfaces isn't limited to the U.S. It's a global trend, and SoundHound AI is emerging as a leader in the space.

Enormous opportunities for expansion in core industries

SoundHound AI's most significant and obvious opportunity lies in the global automotive industry, and it's not hard to see why. In 2024, new light vehicle sales reached 88 million units globally, and this number is expected to increase to 95 million by 2028. Automakers are racing to make vehicles more connected, voice-enabled, and intelligent -- and SoundHound AI is right at the center of that transition.

According to the company, its voice AI is in just 3% to 5% of the vehicles sold by its existing customers. In other words, the company has already landed some big clients -- it now needs to grow its relationships with each of them and to sign new deals with other OEMs globally.

There are several reasons why SoundHound AI is in the driver's seat when it comes to growing its automotive business. Unlike rival applications like Siri, Alexa, or Google Assistant, SoundHound offers a fully embedded voice AI that runs directly on each vehicle's local hardware -- no cloud connection or external ecosystem is required.

That matters a lot to automakers, as it allows them to maintain control over user data and retain their branding rather than handing over the user experience to Apple, Amazon, and Alphabet. This independent, customizable platform is a significant selling point in an era when brands want to control their in-car experience from end to end.

Another obvious area for global growth is the restaurant industry. In the U.S., SoundHound is already working with prominent chains such as White Castle, Chipotle, Jersey Mike's, and others to deploy its voice AI to handle customer interactions across phone ordering, kiosks, and drive-thrus.

But the bigger prize may be overseas. In the U.S., the company views its total addressable market in the space at around 800,000 restaurants, but globally, the number is far higher. Once it has fully proven the value of its product in the U.S., expansion into international franchises will be the logical next step.

More industries, more monetization

While automotive and restaurants are SoundHound's most established verticals today, the company's long-term opportunity goes far beyond these two industries. As voice interfaces become more capable, reliable, and natural, new use cases are emerging, opening the door to broader monetization.

The company has already expanded into areas like:

1. Customer service call centers, where AI agents (leveraging generative AI technologies) can automate routine phone interactions, bookings, and support.
2. Smart home and Internet of Things (IoT) devices, where embedded voice interfaces allow manufacturers to create branded, offline-capable experiences.
3. Hospitality and retail, where AI voice assistants help with check-ins, concierge services, or hands-free assistance in stores.

Each of these verticals offers a distinct monetization model -- from usage-based software-as-a-service contracts to per-device royalties to potential revenue sharing in commerce and transactions. As more industries adopt voice AI, SoundHound's diversified revenue streams could help it scale efficiently.

What it means for investors

SoundHound AI may still be at a fairly early stage of its growth, but it's quietly assembling the building blocks of a global voice AI empire.

If voice is indeed going to be the next major digital interface -- and there are plenty of signs that it will be -- SoundHound AI is a company that investors will want to keep a close eye on.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of June 30, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Nvidia, Palantir Technologies, and Tencent. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

The first half of the year has been somewhat of a rollercoaster ride for stocks -- and investors. Though all three major indexes have now crossed into positive territory, that wasn't the story just a few weeks ago. The S&P 500 index, the Dow Jones Industrial Average, and the Nasdaq Composite each sank in the early months of the year amid concerns that President Donald Trump's import tariff plan would hurt the economy, earnings, and stock performance.

Since then, positive signs, such as initial trade deals and strong earnings reports, have eased investors' minds, and as a result, the indexes rebounded. Still, certain growth stocks, such as some artificial intelligence (AI) players, remain in the doldrums and are heading for a first-half decline. Let's take a look at two that could be poised for a big second-half comeback.

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1. Apple

As Trump announced his tariff plan, investors worried about what it could mean for Apple (NASDAQ: AAPL), in particular, because the company produces most of its iPhones in China, a country most highly targeted by tariffs. Though the president exempted electronics products, this exemption is temporary. He even threatened Apple recently with a 25% tariff on all imported iPhones.

Apple made a move to diversify its manufacturing base, promising that most U.S.-destined iPhones would soon be made in India, but that country faces tariffs, too. All this tariff uncertainty weighed on Apple stock, pushing it down by about 20% so far this year.

So, why should we expect a comeback in the second half? While Trump is serious about bringing manufacturing back to the U.S., it's unlikely that he and his administration would make moves to destroy some of the country's top companies, including Apple. We've seen signs of flexibility in initial U.S. trade deals with the U.K. and China, so it's reasonable to expect a compromise with tech companies that won't limit their growth.

Meanwhile, Apple is a well-established player with a strong financial situation. The company has more than $48 billion in cash and marketable securities. So, it has the resources to address challenges. At the same time, the smartphone giant has a newish growth engine in the form of services. Services revenue, thanks to Apple's huge base of installed devices, has reached record levels quarter after quarter. This growth should continue as loyal Apple users continue to rely on the company for data storage, digital entertainment, and more.

All this means that today, Apple looks like a bargain, trading at 27 times forward earnings estimates, down from more than 35 times late last year. These levels offer it plenty of room to run, and it may do just that on any good news in the second half.

2. SoundHound AI

SoundHound AI (NASDAQ: SOUN) is a specialist in voice AI, with its technology powering voice systems in cars and restaurant ordering systems, to mention just two examples. The stock has plummeted 50% so far this year, but I see this as more of a buying opportunity than a reason to worry, and here's why.

First, after a 150% increase in SoundHound shares over the past year, it's not surprising that some investors may have locked in gains in recent times. Second, growth companies -- particularly young growth companies -- may struggle to expand during rough economic times, so investors' concerns earlier this year led to a sell-off of these sorts of players.

Today, it's important to look at SoundHound's earnings performance and long-term prospects. The company is in high-growth mode, with revenue soaring 150% in the latest quarter as it expands its customer base across various sectors. This is key because use across industries lowers risk, meaning if one customer or industry suffers, SoundHound won't necessarily suffer alongside it.

SoundHound has numerous patents protecting its technology, a system that immediately translates speech into meaning without the speech-to-text step. This results in speed and improved quality.

SoundHound's rapid growth and revenue of $29 million in the quarter, along with the forecasted $140 billion AI voice market size, suggest that much more growth could be ahead for this voice specialist.

All this means that as uncertainty about the general economy lifts and SoundHound continues to deliver growth, the stock could roar higher in the second half of the year.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

The stock market has recovered from April's sudden dip. From the S&P 500 to the Nasdaq Composite, the market-defining indexes are reaching fresh all-time highs almost every day. As of June 27, those portfolios had gained 12.6% and 13.6%, respectively, over the last year.

As a result, some of the best artificial intelligence (AI) stocks are running a bit hot again. I'm keeping a close eye on SoundHound AI (NASDAQ: SOUN) and Micron Technology (NASDAQ: MU) at the moment. Their stocks look a bit pricey today, but I'm ready to pounce on them in the next market dip.

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SoundHound AI's big promises -- and why I'm waiting for a sale

I've been a SoundHound AI fan for years, and I expect big things from this company in the long haul. Voice-control systems are gaining momentum in many different markets, from in-car controls and phone-based menu systems to drive-through windows and data center operations.

SoundHound AI has been fine-tuning its AI-based voice interpretation tools since smartphones were new and hot. These days, the company offers agentic AI, process automation, and real-time conversations. The client list includes many of your favorite consumer electronics and carmaker brands. Their long-term contracts are starting to kick in, converting SoundHound AI's billion-dollar order backlog into actual revenues.

Yet, I can't quite recommend this stock right now. SoundHound AI's shares posted artificial gains in a meme-stock moment in late 2024, and the peak prices are now long gone, but some lingering market effects remain. The stock is up 155% over the last 52 weeks, and it looked expensive at the start of that surge.

So, one of two things must happen before I smash SoundHound AI's buy button again.

• The company could earn its lofty valuation by publishing dramatically stronger financials. Again, the beefy order backlog should generate lots of business over the next several years, but the revenue conversion process has been slow so far.
• The stock could take another haircut. This could happen over time as the meme stock mania fades out or very quickly alongside a downturn in the broader stock market.

I don't mind waiting for SoundHound AI's business plan to gain traction. At the same time, this stock will be at the top of my list of buying ideas the next time every high-priced growth stock takes a big hit.

The art of waiting for a better price on Micron Technology

Micron enters this discussion from a different angle. The memory chip giant's stock often trades at rock-bottom valuations, but it has been skyrocketing since April's tariff-based market dip.

Mind you, the stock isn't exactly expensive even now. Micron's share price is up 95% from April's temporary market bottom, changing hands at a perfectly reasonable valuation of 22.8 times trailing earnings or 4.2 times sales.

So, why am I waiting for another market correction? Why not grab a few shares at today's stock price, which looks pretty fair in the first place?

Because I'm used to Micron trading at much lower valuation multiples. The company operates in a cyclical industry, tied to a mix of surprising and predictable shifts in the smartphone, data center, and PC markets. Micron investors have made a lot of money over the years by saving their buy-in cash for one of the seemingly inevitable downturns. That's the opposite of what's going on right now.

Yes, Micron benefits from the general AI boom, partly thanks to a close partnership with AI accelerator leader Nvidia. Every number-crunching Nvidia Blackwell card comes with several dozen gigabytes of Micron's most advanced high-bandwidth memory (HBM). This close connection to the explosive AI opportunity could lift Micron's stock even higher.

Call me a creature of habit; I'm just more comfortable waiting for the next price drop. Whether it springs from inflation fears or memory-chip price wars, you will almost certainly see one of those Micron buying windows open up in the next year or two. It's OK if I'm wrong, since my personal portfolio already holds a large helping of Micron stock. If I didn't have that advantage, I might consider buying a few shares at today's unusually high prices as well.

Your mileage may vary, of course. I'd still save most of my cash for a rainy day around Micron's Idaho headquarters.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of June 23, 2025

Anders Bylund has positions in Micron Technology, Nvidia, and SoundHound AI. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

The stock market has experienced a lot of volatility this year due to macroeconomic conditions, exacerbated by the Trump administration's tariff policies. In spite of this backdrop, the artificial intelligence (AI) sector continues to thrive.

Substantial AI industry growth has led to a number of high-flying AI stocks. Two of these are SoundHound AI (NASDAQ: SOUN) and BigBear.ai (NYSE: BBAI). SoundHound shares soared 127% over the past 12 months through June 16. In that time, BigBear.ai stock rose 214%.

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These two AI businesses have seen dramatic changes over the past year. The position of each today can help you decide which is the better AI stock to consider investing in for the long haul.

Digging into SoundHound AI

SoundHound built an AI capable of understanding human speech in 25 languages. The company began with a music recognition app. From this start, SoundHound's tech evolved to enable voice commands in cars, which was adopted by automakers such as Stellantis.

In 2024, the developer of voice-activated AI experienced a transformative year. SoundHound made key acquisitions that extended its business into restaurants, healthcare, finance, and other industries.

As a result, SoundHound achieved record first-quarter revenue of $29.1 million, which represented 151% year-over-year growth. The company also exited Q1 with no debt and a strong balance sheet.

Assets in the first quarter totaled $587.5 million with $245.8 million of that in cash and equivalents. SoundHound's stockpile of cash alone eclipsed Q1 total liabilities of $190.5 million.

In addition, the company's future looks bright. According to SoundHound, businesses are upgrading existing answering systems to AI, and CEO Keyvan Mohajer noted, "Our pipeline is the largest it's ever been and our TAM continues to expand, giving us confidence that we have a massive opportunity to significantly grow our business for years to come."

Illustrating his point, SoundHound forecast full-year 2025 revenue to reach between $157 million and $177 million. That's a substantial jump up from 2024's $84.7 million.

A look into BigBear.ai

BigBear.ai kicked off 2025 in a big way with a new CEO, Kevin McAleenan. He focused the company around applying artificial intelligence toward solving critical infrastructure and national security issues. The approach makes sense, since he served as acting secretary of the U.S. Department of Homeland Security during President Donald Trump's first term.

The company's AI technology has been adopted by the U.S. Department of Defense, London Heathrow and Dallas Fort Worth airports, and shipbuilder Austal.

BigBear.ai's customer growth helped the company expand Q1 revenue 5% year over year to $34.8 million. And despite today's uncertain macroeconomic climate, BigBear.ai anticipates its 2025 full-year revenue to increase to between $160 million and $180 million. That's up from the $158.2 million generated in 2024.

But BigBear.ai is not profitable. Year-over-year increases in several Q1 operating expenses resulted in an operating loss of $21.2 million.

Choosing between SoundHound AI and BigBear.ai

When deciding whether to invest in SoundHound or BigBear.ai, one factor to consider is stock valuation. To do so, here's a look at their price-to-sales (P/S) ratios, which measures how much investors are willing to pay for every dollar of revenue. This metric is commonly used with companies that aren't profitable.

Data by YCharts.

As the chart shows, SoundHound's P/S multiple has come down from the sky-high valuation at the start of the year, but it's still far higher than BigBear.ai. In fact, it's higher than AI leader Nvidia's P/S ratio of 24, which suggests SoundHound shares are overpriced, making BigBear.ai the better value.

That said, BigBear.ai's 5% year-over-year revenue growth in Q1 is an underwhelming result for a business operating in the hot artificial intelligence market. The company's mediocre sales growth does not bode well for its ability to eventually reach profitability. Moreover, on BigBear.ai's Q1 balance sheet, over $100 million of its $198.5 million in total liabilities is debt. Total Q1 assets stood at $396.3 million.

By contrast, SoundHound's sales growth is strong, and its balance sheet is healthy. Adding to this, the company's CFO, Nitesh Sharan, stated, "We remain committed to our path to profitability and ... expect to achieve adjusted EBITDA profitability by the end of 2025."

For these reasons, SoundHound is the better AI investment for the long term. But because its stock's valuation is elevated, you may want to wait for the share price to drop before deciding to buy.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $659,171!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $891,722!*

Now, it’s worth noting Stock Advisor’s total average return is 995% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Robert Izquierdo has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Austal and Nvidia. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

There's no denying artificial intelligence (AI) technology has made enormous strides in just the past few years. But the businesses advancing it have still only scratched the surface of the underlying opportunity. Indeed, industry analytics outfit Precedence Research forecasts that the overall AI market will grow at an annualized pace of nearly 20% through 2034.

With that rapid-growth outlook as the backdrop, here are three of the best artificial intelligence stocks to buy right now, while they're all trading at a discount.

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1. Arm Holdings

When conversations turn to the tech companies with the biggest potential to profit from AI, Arm Holdings (NASDAQ: ARM) is one of the least frequently mentioned. Don't be fooled, though: It will play a critical role in artificial intelligence's future.

Arm is a semiconductor company -- sort of. It doesn't make chips. Rather, it designs chips and chip components, and then licenses those designs to more familiar chip companies that may use them unaltered, or modify them to suit their purposes. Those chipmakers themselves often punt their manufacturing duties to third-party foundries.

It's possible you're regularly using a smartphone, computer, or other piece of consumer technology with an Arm-based chip inside it without even realizing it, in fact. As of its most recently completed quarter, the company was generating on the order of $4 billion worth of high-margin revenue per year.

But what specifically makes Arm a great artificial intelligence stock pick (besides its 20% pullback from its February peak)?

When AI was in its infancy, the amount of electricity the hardware used wasn't much of a concern -- engineers were simply trying to figure out how to make the tech work. Now that the technology is proven and going mainstream, though, engineers are grappling with the fact that artificial intelligence platforms are very, very power hungry. According to a Goldman Sachs (NYSE: GS) study, by 2030, the ongoing growth of AI data centers will increase the amount of electrical power drawn by data centers globally by 165% compared to what it was in 2023.

It's not just data centers. The chips in AI-capable smartphones also consume an unusual amount of power, draining batteries' charges at an inconvenient rate.

Well, Arm's chip designs happen to be built from the ground up to be power-efficient. Amazon's Arm-based Graviton processor uses 60% less electricity than comparable chips; Google's Arm-based Axion chip also requires 60% less power than comparable processors.

The importance of this competitive edge isn't always prioritized in an environment where processing speed, capacity, and performance often take center stage. There's a reason, however, that Arm's revenue is expected to grow on the close order of 20% per year for the next three years despite the uncertain macroeconomic backdrop.

2. SoundHound AI

The world's earliest attempts at voice-based interfaces weren't particularly impressive. Although some of them are still around (like voice-commanded phone menus, for which the acceptable response options are fairly limited), many of the higher-level projects using this idea have since been abandoned.

Last year, for example, fast-food chain McDonald's discontinued its use of IBM's automated order-taking tech -- mostly because it never worked quite as well as hoped.

Just don't jump to sweeping conclusions about the idea based on that one decision, though. The underlying tech was actually McDonald's before it was sold to IBM back in 2021 as part of what was more of a cheap experiment than an investment in a whole new profit center that was outside of either company's wheelhouse. Something more purpose-built, atop a more advanced AI platform, could prove more successful.

Enter SoundHound AI (NASDAQ: SOUN).

As its name suggests, SoundHound makes AI-powered voice communications work as was only dreamed of just a few years ago. It has been developing its current propriety AI platform (called Houndify) since 2015, marking the point where mere speech-recognition technology became speech-to-meaning technology, and even speech-to-understanding technology. There's arguably no other player nearly as far along as SoundHound is within the voice-driven sliver of the AI market.

As evidence of this argument, several automakers are also developing their in-car assistance tech around Houndify, while credit card company Mastercard features SoundHound's tech within the automated voice-ordering solution it now offers quick-service restaurants like the aforementioned McDonald's.

It's still not quite in its prime, and many consumers remain a bit hesitant to use automated voice-based interactions for many different aspects of their daily lives. They'll likely come around, though. Market research outfit Market.us believes the worldwide voice-based AI agent market alone will expand at an average annualized pace of nearly 35% through 2034. SoundHound AI is positioned to capture much of this growth.

In fact, it already is. Its first-quarter revenue improved an incredible 151% year over year, accelerating from the 85% growth it reported for the entirety of 2024.

3. BigBear.ai

Finally, add BigBear.ai (NYSE: BBAI) to your list of no-brainer artificial intelligence stocks to buy right now.

To date, most of the market's focus in the AI-powered decision-making software space has been on Palantir Technologies.

And understandably so. Not only did the Centers for Disease Control tap Palantir for help in getting a handle on the COVID-19 pandemic, but several arms of the Department of Defense also rely on its next-generation services to solve next-generation problems. These are high-profile deals. Never even mind the fact that Palantir is the biggest name in the artificial intelligence platform business.

Investment opportunities are relative, though; small companies with lots of growth potential are still capable of producing big gains for investors. There will just be fewer shareholders experiencing them.

BigBear is one such company.

At first glance, it may appear to be a near carbon copy of Palantir. Look deeper, though. BigBear.ai is different by virtue of being largely focused on businesses rather than government institutions. Manufacturing facilities, industrial warehouses, healthcare providers, and biopharma companies are its current core target markets -- although it can and does serve some public sector clients.

Although the private sector tends to make major capital investments at a slower, more methodical pace (since their stakeholders typically require careful care of resources), it's a much bigger opportunity than the government market. That's because AI can ultimately help organizations save money, make money, or both. And of course, both are priorities within the business world.

According to a forecast by Precedence Research, the decision-making piece of the artificial intelligence industry will grow at an average annual pace of 16% per year through 2034.

That doesn't mean this AI stock will always be easy to own in the near or distant future. Not only is BigBear.ai not profitable, its fairly small size means it doesn't enjoy the benefits of scale. It also has relatively few analysts following it and directing investors' attention toward it.

If you can stomach the level of risk and volatility involved, though, this last point might help inspire you to buy: Analysts' current consensus price target of $6.63 for BigBear.ai is nearly twice the stock's present price. That's not a bad tailwind to have while starting a new investment.

Should you invest $1,000 in Arm Holdings right now?

Before you buy stock in Arm Holdings, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Arm Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 12, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, International Business Machines, Mastercard, and Palantir Technologies. The Motley Fool has a disclosure policy.

SoundHound AI (NASDAQ: SOUN) is scheduled to report a critical financial update that investors will not want to miss.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

*Stock prices used were the afternoon prices of May 1, 2025. The video was published on May 3, 2025.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

Now, it’s worth noting Stock Advisor’s total average return is 906% — a market-crushing outperformance compared to 164% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 28, 2025

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

The stock market is quietly staging a comeback following a rough start to 2025. While still down about 9% year to date as of this writing, the innovation-heavy Nasdaq Composite index has rallied by more than 16% from its recent low.

Signs that the Trump administration is willing to adjust some of the sweeping changes in trade policy and negotiate bilateral deals have helped de-escalate fears of a broader trade war. There are still plenty of uncertainties for investors to balance, but also a renewed sense that the big picture remains positive. With the first-quarter earnings season underway, early results from tech leaders are showcasing underlying sector resilience and the ongoing transformative impact of artificial intelligence (AI) as a major market theme.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Let's take a look at three AI stocks that could be poised to make a big bull run.

1. Adobe: An AI bargain

Despite solid growth and record profitability, shares of Adobe (NASDAQ: ADBE) are down about 38% from their 52-week high. The tech giant, recognized for its industry-leading creative media software like Photoshop and Premiere Pro, is capitalizing on strong demand for innovative AI and machine learning features integrated across its app ecosystem.

In the company's fiscal 2025 first quarter (for the period ended Feb. 28), revenue climbed by 10% year over year, alongside a 13% increase in adjusted earnings per share (EPS), with management forecasting further increases for 2025.

The market seems skeptical as to whether Adobe's early AI success will last, as one reason to explain its stock price weakness. Specialized AI companies like privately held Canva and OpenAI have introduced competing AI-powered text-to-image and video generation features, representing emerging competition to Adobe's industry dominance. However, the company's reputation for quality and its loyal customer base, attracted to its professional-grade capabilities, provide plenty of reasons to be optimistic.

Notably, the stock's valuation is compelling, trading at just 18 times its consensus 2025 EPS as a forward price-to-earnings (P/E) ratio, well below the company's five-year average forward price-to-earnings ratio. Adobe appears undervalued and well positioned to rebound if it continues to deliver on its financial targets.

ADBE PE Ratio (Forward) data by YCharts

2. Alphabet: Monster Q1 earnings

Shares of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) surged following a better-than-expected first-quarter earnings report. Revenue grew by 12% year over year, which propelled a massive 49% increase in adjusted EPS for the period ended March 31.

The company's AI strategy is paying off, driven by Google Cloud Platform (GCP), which offers AI infrastructure and generative AI solutions that are gaining market traction at the enterprise level.

Alphabet's latest AI model, Gemini 2.5, is delivering breakthrough performance, translating directly into to higher advertising conversions across Google Search and YouTube. With over 270 million paid subscriptions for services like YouTube Premium and Google One, the company is diversifying its business and generating high-quality cash flow. Management's confidence in the outlook is reflected in a new $70 billion share repurchase authorization and a 5% increase in the quarterly dividend rate.

With the stock still down 22% from its 52-week high, Alphabet is a buy-the-dip opportunity poised to rally higher.

3. SoundHound AI: A hyper-growth story

SoundHound AI (NASDAQ: SOUN) is another tech stock that deserves a closer look following a deep stock price sell-off. Shares are down approximately 52% year to date as of April 25, an extreme correction that doesn't seem justified considering the company's phenomenal growth momentum.

The company is capturing strong demand for its voice-AI technology, representing a more natural and intuitive method for people to interact with AI-powered applications. In 2024, revenue reached $84.7 million, climbing 83% compared to 2023. For 2025, SoundHound expects revenue to nearly double, forecasting a range between $157 million and $177 million. The bullish case for the stock is that these trends are just getting started, with the company exploring a growing number of use cases, including hands-free in-vehicle AI car assistants, customer service chatbots, and voice-enabled ordering for restaurants.

With the potential to consolidate its position in an estimated $140 billion addressable market, SoundHound AI remains well positioned to reward shareholders over the long run.

Should you invest $1,000 in Alphabet right now?

Before you buy stock in Alphabet, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 28, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe and Alphabet. The Motley Fool has a disclosure policy.

Voice control expert SoundHound AI (NASDAQ: SOUN) has been a volatile investment recently.

The stock soared in February 2024 as Nvidia ( bought a few shares. It cooled down a bit when the artificial intelligence (AI) chip giant didn't follow up with a larger investment or a tight partnership. Then the meme stock community stepped in, driving SoundHound AI's share price skyward in an attempt to cause a lucrative short squeeze.

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But short-sellers largely held on to their negative bets on the stock, and the broader market's volatility also weighed on these high-priced shares. Today, SoundHound AI is trading 62% below last December's record price.

Where will SoundHound AI go from here? Is this a good time to buy into a hot growth story, or is the stock still overpriced? Let's see what the company might do over the next year, and how investors should treat this promising but unpredictable investment right now.

What SoundHound AI actually does

Let's start with the basics.

• SoundHound AI addresses a massive target market, providing high-quality voice interpretation services to several important industries. From in-car system controls and drive-through windows to phone-based menu systems and home electronics, the company can deliver game-changing human-to-machine interaction experiences.
• The company has been around for two decades, but wasn't focused on business growth for a long time. SoundHound AI raised money in a 2022 initial public offering to support its newfound verve for financial gains. It had just started to apply its music-based AI audio research to other industries, with early clients including Hyundai, Pandora, and Mercedes-Benz.
• The business opportunity is enormous, but investors need to be patient. In February's fourth-quarter 2024 report, $34.5 million in revenues resulted in a GAAP net loss of $258.6 million. Most of that pain sprung from soaring stock-based compensation expenses, but the direct cash costs were also substantial. The company consumed $108.9 million of operating cash flows last year.
• So SoundHound AI's stock valuation is not supported by profits so far, and even the revenue-based valuation is extremely lofty at 45 times trailing sales. That's a lot, even for a company that doubled its fourth-quarter revenues year over year and has a $1.2 billion backlog of unfilled long-term contracts.

The big backlog debate: How to value future contracts

The most optimistic SoundHound AI bulls argue that the stock price should be calculated from that beefy order backlog, resulting in a hypothetical price-to-sales ratio (P/S) of 3.2. However, the average deal in that order book is about six years, so the average annual value over that period works out to $200 million. Then I'm back to an adjusted P/S ratio of 19.1, and the revenue conversion will be a gradual increase rather than a crisp jump.

To be fair, the order backlog also keeps growing. It's up from about $1 billion in the previous quarter and $661 million in the year-ago report. So the annual revenue value of this growing contract list should account for some continued growth, too. But the whole discussion only gets more theoretical and less realistic with these extra adjustments.

At the end of the day, I think it's fair to call the stock "very expensive" and leave the exact sales-based calculations alone. Some investors will be ready to take the high-priced risk of buying into SoundHound AI's long-term growth story at a lofty price. Others will stay away until one of two things happens: The stock price could drop to a more reasonable level, or the underlying business performance could rise.

Both of these value-boosting trends could very well play out simultaneously, and that idea looks likely to me. If so, today's SoundHound AI buyers will be fine in the long run -- but those who wait for a better entry price will probably enjoy even stronger returns.

What to watch for in the year ahead

2025 could go down as a transformative year in SoundHound AI's history. Management expects full-year revenues to land near $167 million, about double the $84.7 million seen in 2024. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is also supposed to turn positive this year, compared to a $61.9 million EBITDA loss last year.

Of course, these targets were set in February and the global economy looks very different two months later. Whether you plan to buy now or wait for a better entry point, you should probably wait for May 8's first-quarter report. Management will probably provide more accurate full-year targets, either underlining or undermining your investment thesis.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Anders Bylund has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

I keep calling SoundHound AI (NASDAQ: SOUN) a great company with fantastic technology -- and an overpriced stock.

Has anything changed in the tariff-laden downturn lately, or is this promising stock still too rich for its britches?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

SoundHound AI's price moves

As of this writing on Monday, April 7, SoundHound AI's stock isn't exactly following the broader market. That's no surprise, given the stock's hyper-volatile tendencies and lofty beta value of 3.0.

If you're unfamiliar with that data point, a 1.0 value means the stock generally moves in the same direction as the S&P 500 (SNPINDEX: ^GSPC) index, at a similar speed. A very high value like 3.0 points to a stock that usually jumps 3 times higher or falls 3 times lower than the S&P 500, measured in daily percentage returns.

That's not the whole story, of course. Otherwise, a high beta would guarantee accelerated price changes, always in the same direction as the broader market. As it turns out, SoundHound AI's stock also has a low statistical correlation with the S&P 500 chart, currently standing at 0.4. A leveraged fund that simply triples the daily return of the S&P 500 gets a correlation value of 0.96 or more, with 1.0 being a perfect match.

Long story short, SoundHound AI's stock makes a lot of big moves, and not always in the direction other stocks are moving on the same day.

SoundHound AI is still overpriced

That's enough of my statistical nerdery. In a more practical sense, SoundHound AI's stock is still floating much higher than it should, even after a 68% price drop from mid-December's peak.

It's a very welcome price correction, but it could -- and arguably should -- still go much further down. The stock is still up 48% over the last year, and it looked pricey back then. Traditionalists can take one look at SoundHound AI's valuation and walk away. The price is not even in the same zip code as "reasonable" with a price-to-sales ratio (P/S) of 36 and negative profits across the board.

And the tariff debacle hasn't been very helpful. The S&P 500 fell 9.8% in the two-day span from Wednesday evening to Friday's closing bell. SoundHound AI dropped 10.7% in the same period. That's comparable to the index and far from the 30% drop this stock's risky beta value suggests.

When will I sound the "buy SoundHound AI!" alarm?

So no, not much has changed lately. I recently restocked my portfolio with the same amount of SoundHound AI shares I had sold in December. But I did it reluctantly, and only because I've already secured enough profit from this stock to take some unreasonable risks. The shares I bought six weeks ago are down by 12% so far. I plan to double down on this position someday, but not until the price has reached an objectively reasonable level.

In this case, I'm looking at SoundHound AI's order backlog of roughly $1.2 billion, divided by the average contract length of six years. You're looking at annual revenues of roughly $200 million over the next six years. A sensible P/S ratio for a high-growth tech stock like SoundHound AI could be approximately 10x to 13x. Using these values as a guide, SoundHound AI's market value should be something like $200 million times 13, or $2.6 billion.

The stock still trades 17% above that target, which is on the generous side of my preferred valuation range anyway. And the conversion of long-term contracts into reportable revenues may not be as simple and smooth as it sounds -- I'm still looking at future forecasts and estimates to some degree. So I'm not ready to go on a buying spree yet.

The situation is getting better, as SoundHound AI keeps growing its order book while the stock price correction continues. But most investors should let this two-step process continue for a while. Call me back when this stock drops to the mid-$6 range. That would be my time to buy more and recommend that others start to build a SoundHound AI position at a halfway decent price.

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Anders Bylund has positions in SoundHound AI. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.