The broader US stock market has undergone remarkable development since artificial intelligence (AI) emerged as a game changer in early 2023. S&P500 has risen more than 50% in the past two years. Yet some AI stocks have made these gains look like child’s play.
Social media giant since the beginning of 2023 Metaplatforms (NASDAQ: META) is up more than 400%, an astonishing return for such a large company. SoundHound AI (NASDAQ: SOUND)an emerging player in audio AI technology, has surpassed it with a return of almost 700%. Amazing, software company Palantir Technologies (NASDAQ:PLTR) has surpassed them all, galloping over 900% in just 24 months.
These rapid growth trajectories are not typical of the stock market. So do they have the extraordinary fundamentals to justify their returns? Or, more importantly, can they continue? The answer is a mixed bag.
Much of what you’ve seen about AI has involved text-based cues, but conversational AI, the ability to talk to it (and have it speak back to you), is fundamental to how AI can impact everyday life . SoundHound AI specializes in audio and conversation-based AI technology. That’s more complex because it involves the intelligence to think and generate responses, plus the intelligence to understand an audio prompt and translate it into machine data.
SoundHound AI started in the automotive industry. You may be familiar with speaking commands in your car while driving. The company has since expanded into the restaurant industry, enabling conversational AI for drive-thrus and ordering. However, the potential for expansion is enormous, including virtually any application involving human agents. Think of call centers, retail and customer service in many sectors.
The company’s revenue grew 89% year over year in the third quarter and management raised expectations for the fourth quarter. Unfortunately, that growth is small-scale; Third quarter revenue was only $25.2 million. Meanwhile, the stock has a enterprise value of $5.1 billion, against a 2025 revenue estimate of $164 million. That’s a ratio of 31, making SoundHound very expensive these days. It could be difficult for the stock to continue at its current pace, so potential shareholders should look for a pullback before buying.
AI software will impact almost every sector in the future, so there are big opportunities for Palantir Technologies. The company’s AIP platform for developing and deploying AI applications has lit a fire under the company. Revenue growth has accelerated for several quarters and the company still has only 629 commercial customers. There are hundreds of thousands of large corporations (potential customers) worldwide, so Palantir’s long-term ceiling is excitingly high.