Better AI Stock: SoundHound AI Vs. C3.ai

I like SoundHound AI (IM NOT 5.77%). It’s an experienced innovator with a unique position in the artificial intelligence (AI) market, focused on voice-control systems and advanced audio analysis.

I’m also a fan of C3.ai (THERE 3.02%). Founded and led by serial innovator Tom Siebel (yes, the namesake innovator behind enterprise software veteran Siebel Systems), C3 develops industry-specific AI solutions for a wide range of target industries.

But which AI expert would I rather buy right now? Both companies are deeply unprofitable growth stories so far. How can you pick one over the other?

I respect both companies, but only one strikes me as a great buy right now. You can cheat and jump ahead to my disclosure statement below, if you want. You’ll find out that I own one of these stocks but not the other. Wink, wink. Nudge, nudge.

How these companies rely on AI

C3.ai offers a suite of enterprise AI software designed to tackle complex business problems, providing AI solutions tailored for specific industries such as energy, manufacturing, and financial services. Their broad approach aims to embed AI across a variety of business functions to drive efficiencies and predictive analytics.

SoundHound AI specializes in voice-based AI technologies. Their focus is on developing conversational intelligence that powers voice assistants across diverse markets, from automotive controls and drive-through order windows to consumer electronics and phone-service menu systems. It uses a more advanced voice interpretation system than most rivals, based on deep learning and several layers of AI-powered analytics.

The competitive landscape

SoundHound AI’s holds a very specific niche position in voice AI, including a unique approach to voice analysis. Hence, it enjoys a distinct position with very little direct competition. Alternative song-identification experts usually prefer a simpler audio analytics approach, based on audio fingerprints of specific recordings. That method didn’t prepare Shazam to explore wider business opportunities outside the field of song-matching, while SoundHound AI found new applications for its audio tech in many other businesses.

C3.ai can match its audio-specific opponent’s flexibility in many ways. The company’s eponymous home page lists 10 specific target industries with specific case studies in 8 sectors. Its machine learning tools can help clients analyze oil reserves, manage supply lines, research new vaccines, add generative AI smarts to manufacturing services, and more.

Why I’d rather buy SoundHound AI today

In the end, C3.ai’s growth-promoting research and development is less effective than SoundHound AI’s.

C3.ai puts many man-hours (and machine hours) into developing and fine-tuning each industry-specific solution. SoundHound AI’s fundamental platform can serve many different functions with less fine-tuning and expensive packaging of customer-specific solutions.

And I already mentioned how sparse the audio analytics field is, giving SoundHound AI room to run. In C3.ai’s corner of the AI ​​market, the company butts heads with direct rivals such as IBM (IBM -1.05%), Snowflake (SNOW 3.69%)and Salesforce (CRM 0.42%). It’s a mighty group, all pursuing a very large global market for enterprise-oriented AI solutions.

So SoundHound AI has a much clearer path to long-term growth than C3.ai. It chose to specialize on an ultra-specific technology many years ago, and that decision is paying dividends in the form of a largely unchallenged leadership position today.

Finally, the stock is not as expensive as it looks. SoundHound AI’s stock price has more than doubled in 2024, thanks to speculative furor around a modest investment by AI giant Nvidia (NVDA 6.18%). But about half of the speculation-driven price surge has already faded out, and the stock was deeply undervalued before the pop. Today, SoundHound AI’s market cap stands at $1.4 billion with a $661 million balance of unfilled orders and subscription backlogs in the books. And that backlog doubled in 2023.

And there you have it. C3.ai may be a decent investment in the long run, but it faces a brutally competitive market and requires heavy R&D investments to stay relevant. SoundHound AI is deceptively cheap, standing tall in a less rivalry-packed field.

That’s why I own SoundHound AI and not C3.ai. Even if you end up owning both, I think you should take a closer look at the audio expert first.