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?
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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 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 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.