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Better Buy in 2025: SoundHound AI, or This Other Magnificent Artificial Intelligence Stock?

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SoundHound AI (SOUN 11.99%) is a leading developer of conversational artificial intelligence (AI) software, and its revenue is growing at a lightning-fast pace. Its stock soared by 835% in 2024 after Nvidia revealed a small stake in the company, although the chip giant has since sold its entire position.

DigitalOcean (DOCN 2.03%) is another up-and-coming AI company. It operates a cloud computing platform designed specifically for small and mid-sized businesses (SMBs), which features a growing portfolio of AI services, including data center infrastructure and a new tool that allows them to build custom AI agents.

With the second half of 2025 officially underway, which stock is the better buy between SoundHound AI and DigitalOcean?

Image source: Getty Images.

The case for SoundHound AI

SoundHound AI amassed an impressive customer list that includes automotive giants like Hyundai and Kia and quick-service restaurant chains like Chipotle and Papa John’s. All of them use SoundHound’s conversational AI software to deliver new and unique experiences for their customers.

Automotive manufacturers are integrating SoundHound’s Chat AI product into their new vehicles, where it can teach drivers how to use different features or answer questions about gas mileage and even the weather. Manufacturers can customize Chat AI’s personality to suit their brand, which differentiates the user experience from the competition.

Restaurant chains use SoundHound’s software to autonomously take customer orders in-store, over the phone, and in the drive-thru. They also use the company’s voice-activated virtual assistant tool called Employee Assist, which workers can consult whenever they need instructions for preparing a menu item or help understanding store policies.

SoundHound generated $84.7 million in revenue during 2024, which was an 85% increase from the previous year. However, management’s latest guidance suggests the company could deliver $167 million in revenue during 2025, which would represent accelerated growth of 97%. SoundHound also has an order backlog worth over $1.2 billion, which it expects to convert into revenue over the next six years, so that will support further growth.

But there are a couple of caveats. First, SoundHound continues to lose money at the bottom line. It burned through $69.1 million on a non-GAAP (adjusted) basis in 2024 and a further $22.3 million in the first quarter of 2025 (ended March 31). The company only has $246 million in cash on hand, so it can’t afford to keep losing money at this pace forever — eventually, it will have to cut costs and sacrifice some of its revenue growth to achieve profitability.

The second caveat is SoundHound’s valuation, which we’ll explore further in a moment.

The case for DigitalOcean

The cloud computing industry is dominated by trillion-dollar tech giants like Amazon and Microsoft, but they mostly design their services for large organizations with deep pockets. SMB customers don’t really move the needle for them, but that leaves an enormous gap in the cloud market for other players like DigitalOcean.

DigitalOcean offers clear and transparent pricing, attentive customer service, and a simple dashboard, which is a great set of features for small- and mid-sized businesses with limited resources. The company is now helping those customers tap into the AI revolution in a cost-efficient way with a growing portfolio of services.

DigitalOcean operates data centers filled with graphics processing units (GPUs) from leading suppliers like Nvidia and Advanced Micro Devices, and it offers fractional capacity, which means its customers can access between one and eight chips. This is ideal for small workloads like deploying an AI customer service chatbot on a website.

Earlier this year, DigitalOcean launched a new platform called GenAI, where its clients can create and deploy custom AI agents. These agents can do almost anything, whether an SMB needs them to analyze documents, detect fraud, or even autonomously onboard new employees. The agents are built on the latest third-party large language models from leading developers like OpenAI and Meta Platforms, so SMBs know they are getting the same technology as some of their largest competitors.

DigitalOcean expects to generate $880 million in total revenue during 2025, which would represent a modest growth of 13% compared to the prior year. However, during the first quarter, the company said its AI revenue surged by an eye-popping 160%. Management doesn’t disclose exactly how much revenue is attributable to its AI services, but it says demand for GPU capacity continues to outstrip supply, which means the significant growth is likely to continue for now.

Unlike SoundHound AI, DigitalOcean is highly profitable. It generated $84.5 million in generally accepted accounting principles (GAAP) net income during 2024, which was up by a whopping 335% from the previous year. It carried that momentum into 2025, with its first-quarter net income soaring by 171% to $38.2 million.

The verdict

For me, the choice between SoundHound AI and DigitalOcean mostly comes down to valuation. SoundHound AI stock is trading at a sky-high price-to-sales (P/S) ratio of 41.4, making it even more expensive than Nvidia, which is one of the highest-quality companies in the world. DigitalOcean stock, on the other hand, trades at a very modest P/S ratio of just 3.5, which is actually near the cheapest level since the company went public in 2021.

SOUN PS Ratio Chart

SOUN PS Ratio data by YCharts

We can also value DigitalOcean based on its earnings, which can’t be said for SoundHound because the company isn’t profitable. DigitalOcean stock is trading at a price-to-earnings (P/E) ratio of 26.2, which makes it much cheaper than larger cloud providers like Amazon and Microsoft (although they also operate a host of other businesses):

MSFT PE Ratio Chart

MSFT PE Ratio data by YCharts

SoundHound’s rich valuation might limit further upside in the near term. When we combine that with the company’s steep losses at the bottom line, its stock simply doesn’t look very attractive right now, which might be why Nvidia sold it. DigitalOcean stock looks like a bargain in comparison, and it has legitimate potential for upside from here thanks to the company’s surging AI revenue and highly profitable business.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Chipotle Mexican Grill, DigitalOcean, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.



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Cal State LA secures funding for two artificial intelligence projects from CSU

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Cal State LA has won funding for two faculty-led artificial intelligence projects through the California State University’s (CSU) Artificial Intelligence Educational Innovations Challenge (AIEIC).

The CSU launched the initiative to ensure that faculty from its 23 campuses are key drivers of innovative AI adoption and deployment across the system. In April, the AIEIC invited faculty to develop innovative instructional strategies that leverage AI tools.

The response was overwhelming, with more than 400 proposals submitted by over 750 faculty members across the state. The Chancellor’s Office will award a total of $3 million to fund the 63 winning proposals, which were chosen for their potential to enable transformative teaching methods, foster groundbreaking research, and address key concerns about AI adoption within academia.

“CSU faculty and staff aren’t just adopting AI—they are reimagining what it means to teach, learn, and prepare students for an AI-infused world,” said Nathan Evans, CSU deputy vice chancellor of Academic and Student Affairs and chief academic officer. “The number of funded projects underscores the CSU’s strong commitment to innovation and academic excellence. These initiatives will explore and demonstrate effective AI integration in student learning, with findings shared systemwide to maximize impact. Our goal is to prepare students to engage with AI strategically, ethically, and successfully in California’s fast-changing workforce.”

Cal State LA’s winning projects are titled “Teaching with Integrity in the Age of AI” and “AI-Enhanced STEM Supplemental Instruction Workshops.”

For “Teaching with Integrity in the Age of AI,” the university’s Center for Effective Teaching and Learning will form a Faculty Learning Community (FLC) to address faculty concerns about AI and academic integrity. From September 2025 to April 2026, the FLC will support eight to 15 cross-disciplinary faculty members in developing AI-informed, ethics-focused pedagogy. Participants will explore ways to minimize AI-facilitated cheating, apply ethical decision-making frameworks, and create assignments aligned with AI literacy standards.

The “AI-Enhanced STEM Supplemental Instruction Workshops” project will look to expand and improve student success in challenging first-year Science, Technology, Engineering, and Math courses by integrating generative AI tools, specifically ChatGPT, into Supplemental Instruction workshops. By leveraging AI, the project addresses the limitations of collaborative learning environments, providing personalized, real-time feedback, and guidance.

The AIEIC is a key component of the CSU’s broader AI Strategy, which was launched in February 2025 to establish the CSU as the first AI-empowered university system in the nation. It was designed with three goals: to encourage faculty to explore AI literacies and competencies, focusing on how to help students build a fluent relationship with the technologies; to address the need for meaningful engagement with AI, emphasizing strategies that ensure students actively participate in learning alongside AI; and to examine the ethics of AI use in higher education, promoting approaches that embed academic integrity.

Awarded projects span a broad range of academic areas, including business, engineering, ethnic studies, history, health sciences, teacher preparation, scholarly writing, journalism, and theatre arts. Several projects are collaborative efforts across multiple disciplines or focus on faculty development—equipping instructors with the tools to navigate course design, policy development, and classroom practices in an AI-enabled environment. 



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Will we ever feel comfortable with AIs taking on important tasks?

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Imagine a map of the world, divided by national borders. How many colours do you need to fill each country, plus the sea, without any identical colours touching?

The answer is four – indeed, no matter what your map looks like, four colours will always be enough. But proving this required a schism in mathematics. The four colour theorem, as it is known, was the first major result to be proved using a computer. The 1976 proof reduced the problem to a few thousand map arrangements, each of which was then checked by software.

Many mathematicians at the time were up in arms. How could something be called proven, they argued, if the core of the proof hides behind an unknowable machine? Perhaps because of this pushback, computer-aided proofs have remained a minority pursuit.

But that may be starting to change. As we report in “AI could be about to completely change the way we do mathematics”, the latest generation of artificial intelligence is turning this argument on its head. Why, ask its proponents, should we trust the mathematics of flawed humans, with their assumptions and shortcuts, when we can turn the verification of a proof over to a machine?

The argument raging over AI in mathematics is a microcosm of a larger question facing society

Naturally, not everyone agrees with this suggestion. And the argument raging over AI’s use in mathematics is a microcosm of a larger question facing society: just when is it appropriate to let a machine take over? Tech firms are increasingly promising that AI agents will remove drudgery by taking on mundane tasks from processing invoices to booking holidays. However, when we tried letting them run our day (see “‘Flashes of brilliance and frustration’: I let an AI agent run my day”), we found that these agents aren’t yet fully up to the job.

Relinquishing control by handing your credit cards or your password to an opaque AI creates the same sense of unease as with the four colour proof. Only now, we are no longer colouring in a map, but trying to find its edges as we probe new territory. Does evidence that we can rely on machines await us over the horizon, or merely a digital version of “here be dragons”?

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New ‘Centaur’ AI model can predict how we behave with unprecedented accuracy

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A new artificial intelligence (AI) model can predict and simulate human thought and behavior with a surprising degree of accuracy. The language model, called Centaur, could help researchers improve our understanding of human cognition.

The model was trained on more than 10 million real decisions made by participants of psychological experiments. Using this dataset, Centaur predicted and simulated how people would think and behave with 64% accuracy, researchers reported July 2 in the journal Nature.



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