AI Stocks Face Volatile Market Amid Strategic Opportunities

Volatility continues in the U.S. equity market, predominantly affecting AI stocks. However, SoundHound AI and C3.ai showcase strong fundamentals and growth potential, making them compelling investments even in current market conditions.

Date: 24-05-2025

AI Rating: 7

Market Overview
In 2025, the U.S. equity market has been experiencing significant fluctuations due to geopolitical concerns and evolving economic policies. AI stocks, particularly, have taken a hit as investor sentiment has shifted towards defensive sectors like energy and consumer staples. However, there are signs that this sector may represent an opportunity for long-term investors.
Company Fundamentals: SoundHound AI
SoundHound has shown impressive financial growth with a remarkable revenue increase of 151% year over year, reaching $29.1 million in the first quarter. With $246 million in cash and no debt, the company's financial health supports further developmental investments. The management forecast for 2025 indicates a revenue projection of $157 million to $177 million, signaling confidence in sustained growth momentum.
Company Fundamentals: C3.ai
C3.ai has also reported a strong year-over-year growth rate of 26%. Their strategy highlights a focus on developing sophisticated enterprise applications, and a partnership with Microsoft has opened new avenues for growth, resulting in a 460% increase in new agreements. The end of the third quarter revealed an improved cash position of $724.3 million and zero debt, leading to projections of becoming free-cash-flow-positive by the fourth quarter.
Valuation Concerns
Despite the positive growth prospects for SoundHound, concerns over margin compression due to recent product mix changes may affect near-term profitability. On the other hand, C3.ai's expiration of the Baker Hughes reseller agreement poses potential risks but is mitigated by their new lucrative contracts. Investors will want to consider these factors in both companies’ valuations, which currently trade above historical averages.
Outlook
AI infrastructure spending remains robust, positioning companies like SoundHound and C3.ai to benefit from the projected growth of their respective sectors. Long-term investors may find these stocks particularly appealing, especially after substantial drops in valuations, making them poised for an eventual rebound.

Stocks: SOUN AI