Palantir Technologies and SoundHound AI are two leading AI stocks to watch as we approach 2025. Both companies had remarkable performances in 2024, with Palantir's stock increasing nearly 400% and SoundHound AI's soaring by almost 900%. However, for investors considering whether to buy now, it's essential to delve into their business focus, financials, and stock valuations. Palantir focuses on providing tailored AI applications that help clients make informed decisions using the latest data. Its AI integration tools cater primarily to government clients, though the commercial side is growing rapidly. This dual focus positions Palantir to benefit long-term from AI advancements. SoundHound AI specializes in using audio input for AI models, with broad applications in industries like restaurants, automobiles, finance, and healthcare. The company has collaborated with major players like Nvidia to embed its technology into diverse products. Financially, SoundHound AI exhibits faster growth than Palantir, albeit from a smaller base. In Q3, Palantir's revenue grew 30% YoY to $725 million with a 20% profit margin, while SoundHound AI's revenue surged 89% to $25 million but posted a negative 87% margin.

Analysts project Palantir’s revenue will expand by 24% in 2025, whereas SoundHound AI’s revenue could climb 96%. Although SoundHound AI isn't anticipated to turn a profit in 2025, it aims for adjusted EBITDA profitability by year-end. Valuation-wise, both stocks are priced high, with SoundHound AI at 92 times sales and Palantir at 75. These figures reflect elevated market expectations that may not align with current revenue or profit levels. Palantir, more mature as a company, is targeting a 30% profit margin but would need substantial growth to justify its price. SoundHound AI could see its valuation normalize if it continues doubling revenue. Investors must weigh these factors against their investment objectives as they consider entering the AI stock space.