SoundHound vs. GitLab: Better Mid-Cap AI Stock Investment for 2025

AI Investment Opportunities - Stocks with market capitalizations under $10 billion offer significant growth potential if their AI-driven businesses succeed [1] - SoundHound AI and GitLab are two mid-cap stocks showing early success in AI, making them potential candidates for investment in 2025 [2] Company Overview - SoundHound operates a voice AI platform called Houndify, which uses speech-to-meaning and deep-meaning-understanding technologies to enable natural voice interactions [4] - GitLab provides a DevSecOps platform with AI-powered tools for secure software development, including code suggestions and automation [5] Revenue Growth - SoundHound's revenue grew by 89% year-over-year in fiscal 2025 Q3, reaching $25.1 million, partly due to its acquisition of Amelia [6] - GitLab's revenue grew by 31% to $196 million in the same quarter, maintaining a consistent growth rate of 30%-40% over the past six quarters [6] Gross Margins - SoundHound's gross margins were 49% in the last quarter, while GitLab's gross margins were significantly higher at 89% [7] - Higher gross margins for GitLab indicate a stronger ability to convert revenue into profits compared to SoundHound [7] Future Opportunities - SoundHound aims to become an AI commerce voice platform, addressing complex interactions across multiple industries, such as healthcare and banking [9] - GitLab's growth is driven by its GitLab Duo AI add-on and the adoption of its higher-tier platform Ultimate, which now accounts for 48% of its customer base [8] Competitive Landscape - SoundHound faces strong competition from companies like Salesforce and Microsoft, which have developed advanced AI voice and customer service solutions [10] - GitLab's GitLab Dedicated solution, offering data isolation and regional data residency, has gained traction, further solidifying its market position [8] Valuation - GitLab trades at a price-to-sales (P/S) multiple of 9.9 times 2025 analyst estimates, making it cheaper than SoundHound, which trades at over 23.5 times [12] - GitLab's superior gross margins and established business model make it a more attractive investment compared to SoundHound [13]