SoundHound and Cerence: A Strategic Showdown in Voice AI Stocks

Menlo Park, CA – As of April 3, 2025, SoundHound AI has experienced a recent dip of 4.27% to $8.29, despite a remarkable 429% surge in stock value since the beginning of 2023. The company has carved out a niche in voice-activated technology, partnering with restaurants and automakers, yet remains a smaller player in the tech landscape with a market capitalization of approximately $4 billion.

Investors analyzing SoundHound may consider its primary competitor, Cerence, which focuses on AI-driven virtual assistants specifically for the transportation sector. Cerence boasts a market cap nearing $400 million and has also faced challenges, seeing its stock fall by 9.44% recently.

SoundHound launched its robust Houndify platform in 2016, which allows brands to create conversational voice assistants. The platform features automatic speech recognition and natural language understanding, including a smart ordering system for restaurants that effectively processes voice orders.

Revenue generation for SoundHound comes from three main streams: royalties based on product usage, a subscription service for customer interactions, and a monetization layer for enhanced services in voice-enabled products.

Cerence’s offerings, in contrast, are tailored towards the auto industry. The company collaborates with major automobile manufacturers, such as BMW, Daimler, Ford, and General Motors, providing voice-assisted engagement for drivers through dashboard technology. Their software is installed in over 500 million vehicles, which accounted for 52% of cars shipped in fiscal 2024.

The fundamental distinction between the two companies lies in their target markets; SoundHound spans various industries while Cerence remains firmly rooted in the automotive sector. Despite strong growth in 2024, SoundHound’s reported revenue rose 85% to $84.5 million, though much of this increase is under scrutiny due to recent acquisitions.

SoundHound has yet to achieve profitability, posting an adjusted EBITDA loss of $61.9 million. For the current year, the company anticipates doubling its revenue, projecting between $157 million and $177 million.

Conversely, Cerence, which is larger in scale, saw a revenue climb of 12.5% to $331.5 million, but its numbers have recently declined due to the loss of a significant contract with Toyota, forecasting revenue between $236 million and $247 million.

While SoundHound’s rapid growth positions it with a price-to-earnings (P/E) ratio of 37, Cerence, with its more volatile projections, trades at a trailing P/E below 8, albeit with an anticipated forward P/E near 60.

The market reacted positively earlier this year when Cerence announced a partnership with Nvidia, while Nvidia’s recent decision to sell its stake in SoundHound raised flags among investors. Though SoundHound shows robust growth potential, experts caution that long-term profitability may remain out of reach, particularly in a competitive landscape with technology giants like Amazon, Alphabet, and Apple.

For those seeking lower-risk investments, Cerence’s profitability and established market presence make it an attractive choice, especially as they leverage partnerships to bolster future growth. “Risk-seeking growth stock investors may prefer SoundHound, but Cerence is the better buy here as it showcases stability and profitability,” a financial analyst weighed in.

Suzanne Frey, an executive at Alphabet, and John Mackey, former CEO of Whole Foods Market, are board members of The Motley Fool, which has positions in both companies and recommends exploring Cerence for a balanced investment approach.