SoundHound AI (SOUN -6.49%) and BigBear.ai (BBAI -3.47%) represent two different ways to invest in the booming artificial intelligence (AI) market. SoundHound AI develops voice and audio recognition tools, while BigBear.ai's AI modules analyze data across edge networks.
Both companies went public by merging with special purpose acquisition companies (SPACs), and both stocks more than quadrupled over the past 12 months. Let's review the catalysts that drove these two AI stocks higher -- and whether either one is still worth buying in this frothy market.
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SoundHound is still growing like a weed
SoundHound AI's namesake app identifies songs from a few seconds of recorded audio or a few hummed bars. But it generates most of its revenue from Houndify, a developer platform that enables companies to produce their own AI-powered voice recognition services. Houndify's top customers include automakers such as Stellantis, quick-service restaurants like Chipotle, and credit card giants like Mastercard. It's a popular option for companies that don't want to share their data with big tech companies.
SoundHound's revenue rose 47% in 2023, 85% in 2024, and 187% year over year in the first half of 2025. That acceleration was impressive, but it was partly driven by its acquisitions of the AI restaurant services provider SYNQ3, the online food ordering platform Allset, and the conversational AI company Amelia.
Its integration of those acquisitions -- along with a higher mix of lower-margin restaurant service revenues, rising cloud infrastructure costs, and high onboarding expenses for its new customers -- reduced its adjusted gross margin from 76.2% in 2023 to 55.3% in the first half of 2025. It's also still unprofitable under generally accepted accounting principles (GAAP). So while SoundHound is growing, it hasn't proven that its business model is sustainable yet.
Nevertheless, the bulls expect its gross margins to rise again as economies of scale kick in, its pricing power improves, and it expands its higher-margin software licensing and royalties segment.
The broader buying frenzy in AI stocks could also drive its shares higher. Analysts expect its revenue to grow at a compound annual growth rate (CAGR) of nearly 47% to $267 million from 2024 to 2027. But with a market cap of $7.4 billion, it's already valued at 28 times its projected sales for 2027. That bubbly valuation could set it up for a steep pullback.
Brighter days could be ahead for BigBear.ai
BigBear.ai's three AI modules -- Observe, Orient, and Dominate -- can ingest data, identify trends, and predict future outcomes, respectively. These modules are plugged into edge networks, which intercept the data that flows between origin servers and end users. It also shares that data with bigger data mining companies like Palantir.
Its revenue stayed nearly flat in 2023 and only grew 2% in 2024. It struggled with the bankruptcy of its top customer Virgin Orbit, competition from similar companies, and tough macro headwinds for enterprise software companies. Nevertheless, its gross margin still expanded 240 basis points to 28.6% in 2024 as it gradually stabilized its business.
Under Mandy Long, who took the helm as its CEO in late 2022, BigBear.ai acquired the AI vision firm Pangiam, which developed biometric identity tools for the U.S. government, to diversify its business and grow its revenues. Pangiam's CEO Kevin McAleenan, who previously served as the Acting Secretary of the Department of Homeland Security (DHS) during the first Trump administration, succeeded Long as BigBear.ai's new CEO in early 2025 and focused on gaining more government contracts.
Under McAleenan, BigBear.ai's backlog swelled as it secured new digital ID and biometrics initiatives for the DHS, a modernization project for the U.S. military's Orion Decision Support Platform (DSP), and other supply chain projects. But in the first half of 2025, its revenue still dropped 8% year over year as it dealt with near-term disruptions to its government contracts, and its gross margin shrank 170 basis points to 23.1%. For the full year, analysts expect its revenue to decline 16%.
That near-term outlook seems dim, but analysts expect its revenue to rise 14% in 2026 and 6% to $162 million in 2027 as it converts its backlog into actual revenues. However, it's still expected to stay unprofitable on a GAAP basis. With a market cap of $2.8 billion, it already trades at 17 times its 2027 sales.
The better buy: SoundHound AI
I wouldn't rush to buy either of these stocks right now, since there's a bit too much AI-driven hype baked into their current valuations. But if I had to pick one over the other, I'd buy SoundHound, because it's growing faster, faces fewer direct competitors, and has healthier gross margins. The market's demand for AI-powered voice recognition services should also continue climbing over the next few years as more companies gradually reduce their dependence on human employees.
