After a strong market rebound since April, some of the market’s most attractive artificial intelligence (AI) stocks are no longer cheap. However, that doesn’t mean that they have no upside potential. In fact, for long-term investors who can tolerate short-term volatility and premium valuations, there are still a few attractive picks that can help them build wealth, especially as AI adoption has accelerated across all walks of business and life.
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You also would not need boatloads of cash to build this fortune. Even with $200 to invest today (which is not required for paying bills or contingencies), picking a stake in Palantir Technologies (NASDAQ: PLTR) and SoundHound AI (NASDAQ: SOUN) can prove to be quite brilliant. Here’s why.
1. Palantir Technologies
Data analytics giant Palantir has delivered an impressive financial performance in its recent first-quarter fiscal 2025 results (ending March 31), and the growth trajectory is likely to remain strong in the long run.
The company’s revenues jumped 39% year over year to $884 million. The growth rate is nearly double the 21% top-line growth rate achieved in the same quarter of the previous year, indicating that the company is on an accelerated growth trajectory. The U.S. commercial business has emerged as a significant growth catalyst, with year-over-year growth of 71%, crossing the $1 billion annual run rate threshold in the first quarter.
Palantir also posted a Rule of 40 score of 83%, a two-percentage-point increase compared to the previous quarter. It is a critical metric for evaluating the performance of software-as-a-service (SaaS) and other high-growth technology companies, stating that the combination of revenue growth and profit margins should be at least 40%. With Palantir operating at approximately double the cutoff, it underscores the quality growth of this AI giant. The company also generated $370 million in free cash flow, demonstrating that it has sufficient funds to support its growth initiatives.
Palantir differentiates itself from other AI players with its “Warp Speed” manufacturing operating system, built atop the Artificial Intelligence Platform (AIP), to streamline various industrial operations. Furthermore, instead of focusing on building newer and more advanced AI models, which eventually lose their competitive advantage, the company has developed a solid ontological framework that helps it relate the assets and relationships within an organization to its digital counterparts. This data advantage is leading to huge switching costs for customers, as replacing it becomes not only expensive but also disruptive for the overall business.
Palantir trades at 208.3 times forward earnings, which is very expensive. However, profitable and practically debt-free AI companies with accelerating top-line growth and a huge $5.4 billion cash balance are not easy to come by. Hence, the stock is a smart buy for long-term investors who are ready to ride some volatility, even at elevated valuation levels.
2. SoundHound AI
Amidst multiple AI stocks with unproven technologies, SoundHound AI (NASDAQ: SOUN) stands out with its voice AI platform, which is already seeing strong traction in the enterprise world.
This is evident considering that the company’s revenues soared a dramatic 151% year over year in the first quarter of fiscal 2025 to $29.1 million. Additionally, the company has also built a $1.2 billion backlog of cumulative subscriptions and bookings. This implies that the company has impressive revenue visibility for several more years to come.
SoundHound is leveraging its multimodal and multilingual proprietary Polaris foundational model to power its conversational AI solutions. However, what makes SoundHound’s technology stand out is its ability to directly process voice commands to understand the underlying meaning.
On the other hand, traditional voice systems first convert the voice to text and then to a meaningful representation. This “speech-to-meaning technology” has helped dramatically reduce latency in real time, thereby making voice communications four times faster than competitors, while also improving accuracy to twice the level of competitors, even in noisy environments. The superior technology has helped the company build a sticky customer base.
Although previously geared mainly toward the restaurant industry, SoundHound is now actively diversifying its customer base into healthcare, automotive, and financial services. Furthermore, no single customer accounted for more than 10% of its revenue in the first quarter.
SoundHound has also been focusing on strategic acquisitions to build a comprehensive voice ecosystem. The acquisition of SYNQ3 has dramatically expanded its market reach in the restaurant industry. The Amelia acquisition has also strengthened the company’s position in the massive enterprise AI market.
Recently, SoundHound launched Amelia 7.0, powered by a proprietary multiprocess agentic framework called “Agentic Plus.” This platform will enable businesses to deploy fleets of AI agents that can understand, reason, and autonomously complete actions.
Finally, the Allset acquisition has positioned SoundHound as a key player in the voice commerce space. The company is developing technology that allows drivers to order food while driving, thereby enabling SoundHound to leverage its automotive partnerships with restaurant networks.
It is indisputable that the stock looks expensive at 36.7 times sales, but that misses the bigger picture. With $245.8 million in cash and just $4.6 million in debt, SoundHound has the financial flexibility to focus on several growth initiatives. Management also expects to reach adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profitability by the end of 2025.
Considering the company’s cutting-edge conversational AI technology, robust financial trajectory, and focused inorganic growth strategy, SoundHound seems an attractive buy now.
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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
