Will 2025 be the year that the king of the artificial intelligence (AI) sector is dethroned? To be sure, chipmaking giant Nvidia (NVDA +2.71%) isn't likely to take a trip to the dungeon. But with its market cap already above $3.3 trillion, some investors might reasonably wonder if Nvidia's growth rate will slow down this year.
For growth stock investors, that could be the most important question. And if so, what up-and-coming AI companies might be better options for aggressive investments in 2025? One obvious place to look would be among the companies Nvidia itself has invested in. SoundHound AI (SOUN +1.86%) is one such company, and its stock broke out last year. After a sharp pullback recently, investors might wonder if this is a good time to buy shares of this maker of voice recognition AI technology solutions.
Parabolic growth can't last forever
Nvidia has achieved its massive market cap valuation on more than just potential and promise. Its revenue and earnings per share have soared over the past three years, and the stock price kept pace.
Demand for Nvidia's advanced chips and architecture for building and training large language models (LLMs) and other AI applications remains strong. The company has said it will henceforth introduce new graphics processing unit (GPU) chips on an annual cadence. Its backlog is filled with orders for its new Blackwell chips even as it continues to satisfy demand for GPUs made with its previous Hopper architecture.
Sales growth is expected to continue as hyperscalers build more data centers and as Nvidia's next-generation Rubin AI chip architecture is due out next year. However, the pace of revenue growth from Nvidia's data center segment has already meaningfully slowed from year-ago levels.
| Quarter | Data Center Segment Revenue | Growth (QOQ) | Growth (YOY) |
|---|---|---|---|
| Q4 Fiscal 2023 | $3.62 billion | (5.7%) | 10.8% |
| Q1 Fiscal 2024 | $4.28 billion | 18.5% | 16.6% |
| Q2 Fiscal 2024 | $10.32 billion | 141% | 171% |
| Q3 Fiscal 2024 | $14.51 billion | 40.6% | 279% |
| Q4 Fiscal 2024 | $18.4 billion | 26.8% | 409% |
| Q1 Fiscal 2025 | $22.56 billion | 22.6% | 427% |
| Q2 Fiscal 2025 | $26.27 billion | 16.4% | 154% |
| Q3 Fiscal 2025 | $30.77 billion | 17.1% | 112% |
Data source: Nvidia. Chart by author. Note: Fiscal 2023's Q4 ended Jan. 29, 2023, which was the first quarter following the announcement of OpenAI's ChatGPT. Fiscal 2025's Q3 ended Oct. 27, 2024, and is the latest data available.
That's not to say that there won't be new opportunities for Nvidia to reaccelerate its revenue growth rates, but aggressive investors might want to look at other AI stocks, too.
A budding business can grow faster
in the final quarter of calendar year 2023, Nvidia bought 1.73 million shares of SoundHound AI's stock (valued at about $3.6 million at the time). It has proven to be a good investment thus far. SoundHound AI stock is up by more than 650% over the last year, even after a meaningful drop of more than 40% since Christmas.
NASDAQ: SOUN
Key Data Points
The growing optimism comes as SoundHound has expanded its market potential. What started with voice technology applications in customer service sectors such as restaurants has expanded to other areas, including automotive use cases for voice generative AI bringing cloud-based LLMs into vehicles.
Most recently, SoundHound announced it will supply a new hands-free voice assistant for electric vehicle (EV) maker Lucid's luxury vehicles. Management saw sales growing fast enough to increase its 2024 revenue guidance by nearly 20% in just the six months between its first-quarter and third-quarter reports. The company outlook for 2025 is that sales will double to $165 million at the midpoint of its guidance range.
Any business that's doubling its sales year over year is one that should interest investors. But a fledgling company like SoundHound AI also comes with higher risks. It still isn't profitable, and its cash position dropped from $226 million on March 31, to $136 million as of Sept. 30.
Is added risk worth it?
That elevated risk tilts the balance of an investment decision in Nvidia's favor, in my opinion. SoundHound AI could be a rewarding investment from here, but Nvidia still can be too.
Nvidia still has growing revenue and profits. In addition to the innovative GPU products it continues to roll out, it has robotics and automotive segments that haven't yet meaningfully contributed to earnings. However, self-driving vehicles and robots designed to boost efficiency in many industries could go mainstream in the coming years.
Those prospects give Nvidia investors added opportunities for growth, and help make it the better investment, even at its current stage and valuation.
