SoundHound uses AI to interpret human speech and applies its technology to business applications, such as receiving verbal commands from customers.
Astera Labs offers hardware products that are the building blocks for powering AI systems.
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The rise of artificial intelligence (AI) has unleashed a wave of related businesses to consider investing in. Among them are SoundHound AI(NASDAQ: SOUND) and Astera Laboratories(NASDAQ: ALAB).
The first offers voice-enabled artificial intelligence that businesses can use in customer interactions, such as when taking orders at restaurants. The latter acts behind the scenes, providing components used in data centers.
Both are seeing strong sales growth thanks to demand for AI-related technologies. But what seems to be the best long-term investment?
Image source: Getty Images.
Buying SoundHound stock means accepting a lot of volatility, given its beta of nearly 3. For example, last December, the stock soared to a 52-week high of $24.98, but fell back to earth in 2025, hitting a 52-week low of $6.52 on April 7 after President Donald Trump’s tariff policies caused the stock market to crash.
The resurgence in SoundHound’s share price came in October after investment bank HC Wainwright raised its price target on the stock to $26. The average target among Wall Street analysts is now $16.94.
This wild ride illustrates how the popularity of AI among investors has impacted the stock, as well as the fact that the company has strengths and shortcomings.
For example, the voice AI expert has achieved several notable wins this year. In October, it announced an expanded deal with French insurance provider Apivia Courtage, a deal that came about thanks to impressive results achieved by SoundHound’s agent AI. In the third quarter, SoundHound sales soared to record revenue of $42 million, a 68% year-over-year increase.
However, the company made a series of acquisitions that, while boosting sales, dramatically increased its costs. As a result, it posted a net loss of $109.3 million in the third quarter, an increase of more than 400% from its loss of $21.8 million in the prior-year period. That substantial sum, compared to revenues of $42 million, is concerning, although the company indicated it is working to reduce expenses.
Astera Labs’ share price movements were more favorable to shareholders. The stock went from a 52-week low of $47.13 during the April crash to a high of $262.90 on September 18.
Stocks rose in September on upgrades from Wall Street analysts, such as German Bank setting a target price of $200. But Astera’s strong business performance justified those analyst moves.
The company generated record third-quarter revenue of $230.6 million, an impressive 104% year-over-year increase. This helped Astera achieve quarterly net income of $91.1 million, a big improvement over its net loss of $7.6 million in the prior-year period.
That success was driven by demand for its data center components, which allow AI systems to operate faster and more efficiently. To further strengthen its offering, the company will acquire aiXscale Photonics, a German specialist in optical glass coupling technology. This will give Astera the ability to provide the high-bandwidth, low-power solutions customers need as AI technology infrastructure expands to data centers the size of small cities.
Both SoundHound and Astera Labs have benefited from the AI megatrend. But while both companies saw revenue increases in the third quarter, looking at a longer period of time provides an important insight into comparing them: Astera has seen the most sales growth over time.
YCharts data. TTM = last 12 months.
Added to this is the fact that Astera is profitable. SoundHound is not: In the third quarter, it posted an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $14.5 million. However, management believes it can achieve profitability on an adjusted EBITDA basis in the near future.
In terms of valuation, both companies are at roughly the same level when viewed through the lens of their price-to-sales ratios. This metric measures how much investors are willing to pay for each dollar of revenue generated over the past 12 months and is commonly used to measure the values of companies that are not profitable, such as SoundHound.
YCharts data.
SoundHound’s valuation skyrocketed in early 2025 and that contributed to its share price decline as the year progressed. Now, his assessment is more reasonable.
However, considering that Astera has roughly the same sales multiple but is a profitable business with higher revenue growth over time, it is the top AI stock to invest in today.
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Robert Izquierdo holds positions at SoundHound AI. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.
Best AI Stock: SoundHound AI vs. Astera Labs was originally published by The Motley Fool
