The adoption of artificial intelligence (AI) software is increasing at an incredible pace because of the productivity and efficiency gains this technology is capable of delivering, and the good part is that this niche is likely to sustain a healthy growth rate over the long run.
According to ABI Research, the AI software market is expected to clock a compound annual growth rate (CAGR) of 25% through 2030, generating $467 billion in annual revenue at the end of the decade. That's why it would be a good time to take a closer look at the prospects of SoundHound AI (SOUN +4.73%) and C3.ai (AI +1.17%) -- two pure-play AI companies that could help investors capitalize on a couple of fast-growing niches within the AI software market -- and check which one of them is worth buying right now.
Image source: Getty Images.
The case for SoundHound AI
SoundHound AI provides a voice AI platform where its customers can create conversational AI assistants and voice-based AI agents that can be deployed for multiple uses, such as taking orders in restaurants, car infotainment systems, and customer service applications, among others.
NASDAQ: SOUN
Key Data Points
This particular market is growing at a nice clip, as deploying AI-powered voice solutions can help companies improve productivity and efficiency, since they will be able to automate tasks. Companies can now significantly improve their customer interaction experiences, thanks to the availability of round-the-clock multilingual AI agents and assistants.
Not surprisingly, SoundHound AI has been witnessing a robust growth in demand for its voice AI solutions, which explains the solid revenue growth in the past year.
SOUN Revenue (TTM) data by YCharts.
But here's what investors should look forward to: The conversational AI market could grow at an annual average rate of almost 24% through 2030, generating over $41 billion in annual revenue by the end of the decade. SoundHound AI has been growing at a much faster pace than the overall market, suggesting it is gaining a bigger share of this lucrative space.
SoundHound's revenue guidance of $167 million at the mid-point for 2025, is nearly double the revenue it reported last year. Importantly, its cumulative subscriptions and bookings backlog stood at a massive $1.2 billion last year. This metric is a measure of the potential revenue that the company expects to "realize over the coming several years," suggesting it can maintain its healthy growth rates for a long time to come thanks to the AI-fueled opportunity it's sitting on.
The case for C3.ai
C3.ai is a pure-play enterprise AI software platform provider that enables its customers to build generative AI applications and agentic AI solutions. The company claims that it provides 130 comprehensive enterprise AI applications ready for deployment across industries such as oil and gas, manufacturing, financial services, utilities, chemicals, defense, and others.
NYSE: AI
Key Data Points
It has been in the news of late for receiving a bigger contract worth $450 million from the U.S. Air Force for maintaining aircraft, ground assets, and weapons systems for the next four years. However, this is just one of the many contracts that the company has been landing lately.
C3.ai's offerings are used across diverse industries, and its customer base includes the likes of Baker Hughes, which recently expanded its partnership with the company; local and state government bodies across multiple U.S. states; and companies such as Ericsson, Bristol Myers Squibb, Chanel, and others. The company's fast-expanding customer base and the bigger contracts that it is signing with existing customers explain why there has been an uptick in C3.ai's growth of late.
AI Revenue (TTM) data by YCharts.
The company finished fiscal 2025 (which ended on April 30) with a 25% increase in its revenue to $389 million. Management expects another 20% increase in total revenue in fiscal 2025. Consensus estimates suggest that C3.ai is likely to report similar growth next year, followed by an acceleration in fiscal 2028.
AI Revenue Estimates for Current Fiscal Year data by YCharts.
There's a strong possibility, however, that C3.ai will exceed expectations and its own forecast for growth this year. That's because C3.ai ended the previous fiscal year with 174 pilot projects, which it calls initial production deployments. The good part is that the company has been converting its pilots into contracts at a healthy rate.
C3.ai turned 66 of its initial production deployments into long-term contracts in fiscal 2025. The company ended fiscal 2024 with 123 pilot projects, which means that it has a conversion rate of more than 50%. So the robust increase in the company's pilot projects last year means that it could close more such initial production deployments into full agreements in the current fiscal year, going by past trends.
So there is a strong possibility of C3.ai's growth rate exceeding Wall Street's expectations, which should ideally turn out to be a tailwind for its stock price in the long run.
The verdict
While it is clear both SoundHound and C3.ai are growing at a nice pace because of AI, the former's growth rate is much higher. However, to buy SoundHound stock, investors will have to pay a handsome price-to-sales ratio of nearly 38. C3.ai, on the other hand, is trading at a much more attractive 8 times sales, which is almost in line with the U.S. technology sector's average sales multiple.
So, investors looking for a mix of steady growth and attractive valuation can consider buying shares of C3.ai. However, if you have a higher appetite for risk and are willing to pay for a stock with a richer valuation, then consider buying SoundHound AI, as its faster growth could help it clock more upside, though the expensive valuation also exposes it to more volatility.
