BigBear.ai vs. SoundHound AI: Which AI Stock is the Better Buy?

BigBear.ai vs. SoundHound AI: A Head-to-Head in the AI Market

In recent years, two relatively small artificial intelligence (AI) companies have emerged and captured the attention of retail investors: BigBear.ai (BBAI) and SoundHound AI (SOUN). Both companies are striving to revolutionize their respective industries with innovative AI-powered solutions. BigBear.ai is a data analytics company that has secured multiple contracts with government agencies. Often, bullish investors compare it to the much larger Palantir Technologies, although BigBear.ai still has a long way to go in proving that it's on the same track. BigBear.ai focuses on providing actionable intelligence through advanced data analytics, specifically targeting the government sector. SoundHound AI is a voice AI company that has been expanding into different industries as a way to be less dependent on the automotive sector. It experienced explosive growth in its most recent quarter. And previously, chipmaking giant Nvidia invested in the business. SoundHound AI develops voice recognition and natural language processing solutions, serving a diverse range of industries.

BigBear.ai: A Government Partner with Long-Term Potential

BigBear.ai has a close relationship with the U.S. government, which can position it for some excellent long-term opportunities. CEO Kevin McAleenan said in the company's second-quarter earnings release he sees "tremendous opportunities ... coming from the One Big Beautiful Bill, particularly in the Department of Homeland Security, and several of which are uniquely aligned to our core capabilities." While there has been volatility in the company's recent results (sales totaling $32.5 million were down 18% for the June-ended quarter), the longer-term picture may be a far more promising one for BigBear.ai as it capitalizes on more opportunities involving the government. BigBear.ai has a market cap of around $2.6 billion. The company has a strong backlog of $380 million, which is a great indication that there is ample demand for its services. Its operations are also well funded with BigBear.ai's cash and cash equivalents balance as of the end of the quarter totaling $390.8 million, which can give it a lot of runway when you consider that it has burned through just $10.5 million from its day-to-day operating activities during the past six months.

SoundHound AI: Diversifying Growth Prospects Through Voice AI

SoundHound AI has a much more diverse customer base after acquiring Amelia AI last year. Prior to that, the big concern was its exposure to the automotive sector. But now it has opened up significantly more potential. The company estimates that the total addressable market for voice AI products and services is a whopping $140 billion, and by being in more industries, it's in a much better position to take advantage of that potential. The acquisition of Amelia also resulted in a big improvement on its top line, with the new business helping boost SoundHound's revenue to $42.7 million for the period ended June 30 -- more than triple the $13.5 million it reported in the prior-year period. The company is also eyeing some incredible growth opportunities ahead. CFO Nitesh Sharan said in the company's Q2 release, "We are moving with speed to capture the explosion we're seeing in the voice and conversational AI industry, where customers across sectors are realizing the tremendous value they can achieve by adopting our market-leading solutions." Despite SoundHound AI's stock being down year-to-date, it has been picking up steam in recent weeks. With some tremendous growth prospects in AI and a lot of runway, growth investors may be captivated with the potential that SoundHound possesses. It's important to note, however, that SoundHound burned through $43.7 million over its past six months and its cash and cash equivalents totaled $230.3 million.

Conclusion: Analyzing Risks and Rewards

Both companies represent risky investments. Government contracts can result in more stability for a business such as BigBear.ai down the road. While acquisitions can boost growth, they can also make it difficult to dissect just how well companies are growing organically. The choice between BigBear.ai and SoundHound AI depends on each investor's risk tolerance and investment goals. Thorough research and consideration of all relevant factors should be undertaken before making any decisions.