If you’re tired of hearing about artificial intelligence (AI) on Wall Street, I have bad news. This issue is unlikely to disappear any time soon. The market is incredibly broad, encompassing technologies such as speech recognition, robotics, machine learning (ML), natural language processing, autonomous vehicles, and more.

According to Statista, the artificial intelligence field could have a total annual market of over $800 billion by 2030. Generative AI – as used in ChatGPT, Perplexity and alphabet‘s Gemini – is also expected to grow rapidly. For perspective, Microsoft And Nvidia had total sales of $367 billion in the last 12 months.

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Image source: Statista.

It’s easy to see why companies are fighting for a piece of this market and investors are following suit. The enthusiasm sent some stocks soaring in 2024. As I write this, Palantir Technologies (NASDAQ:PLTR) The stock is up 335% since the start of the year SoundHound AI (NASDAQ:SOUN) has gained a staggering 811%.

Will it stay that way in 2025? There are a few things to consider here.

Why SoundHound AI stock is skyrocketing

Automated ordering at drive-thru and fast-casual restaurants is coming to a city near you. There are too many cost-saving incentives for companies not to make the transition now or in the near future. More sophisticated virtual assistants with voice recognition are also coming to new vehicles. The technology enables conversational communication and retrieves answers from an extensive database.

For example, you can ask for directions to the top-rated Italian restaurant nearby within 10 miles, the weather on Saturday at 5 p.m., or the most scenic route.

SoundHound’s proprietary technology powers these platforms, and the company continues to add new customers, driving the stock to all-time highs. In December alone, Church’s Chicken piloted the technology at some locations and Torchy’s Tacos implemented SoundHound’s Voice AI phone ordering system at all locations.

Third-quarter revenue rose 89% year-over-year to $25 million. SoundHound expects total revenue of $82 million to $85 million in 2024, possibly doubling to $155 million to $175 million in 2025.

The growth is incredible, but SoundHound is neither profitable nor generating positive cash flow from its operations. The company reported an operating loss of $84 million and an operating cash flow loss of $76 million for three-quarters of 2024. Losses are not unusual for a fast-growing technology company, but investors should be aware of the risk.

The incredible rise in SoundHound stock is pushing valuation limits to extreme levels. As shown below, the stock trades for more than 90 times sales and 45 times analysts’ 2025 forecast.

SOUN horsepower ratio data from YCharts

These metrics are incredibly high for any company – and certainly for an unprofitable one. That doesn’t make SoundHound a bad stock over the long term, but there are echoes of the 2021 tech bubble in the market. I’ve been bullish on the stock lately, but after the great run-up, that was significantly less the case. Buyers of SoundHound should expect drastic price fluctuations over the next few years at the current price.

Is Palantir stock a good buy now?

Palantir, another AI high-flyer, saw a significant boost due to its Artificial Intelligence Platform (AIP). AIP uses generative AI to assimilate data and assist in high-level decision making by conversationally interacting with people in defense and the private sector.

One example Palantir gives is a wholesale company experiencing downtime due to inclement weather at a location. AIP helps determine the optimal redirection and shows the impact on profits. In another defense example, suppose an enemy force is massing near a border. AIP can show the commander the available resources and suggest possible enemy formations.

These impressive capabilities have driven Palantir’s commercial and overall customer growth, as shown below.

Image source: Palantir.

Total revenue reached $726 million in the third quarter, up 30%, and Palantir’s operating profit increased from $40 million to $113 million year-over-year, demonstrating the success of the AIP product.

The stock has a market cap of $169 billion, or 60 times 2024 sales guidance. While the valuation is more comfortable than SoundHound’s, it’s by no means a value. Both companies are doing exciting things in AI and appear to be long-term winners. Although there is significant downside risk, stocks could continue to rise in 2025 – but don’t expect the same exponential gains seen this year.

Don’t worry if you missed out on the spectacular gains, there are plenty of excellent companies to invest in. A significant decline could happen at any time, and AI still has a lot of time ahead of it.

Should you invest $1,000 in SoundHound AI now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Bradley Guichard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia and Palantir Technologies. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.