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

As the artificial intelligence (AI) sector continues to grow and evolve, investors are increasingly looking for mid-cap stocks with strong growth potential and undervalued prices. Two companies that have caught the attention of investors are SoundHound AI (SOUN) and GitLab (GTLB). Both companies operate in the AI space, but they have different business models and market focuses. In this article, we will compare these two companies and determine which one might be the better mid-cap AI stock investment for 2025.

SoundHound AI (SOUN)

SoundHound AI operates a voice AI platform called Houndify, which helps voice assistants interact in a more natural and conversational manner. The company's primary focus is on providing conversational experiences to businesses across various industries, such as automotive, TV, IoT, and customer service. SoundHound AI has made strong early inroads in the automobile and restaurant spaces and has expanded into other industry verticals through its recent acquisition of Amelia.

One of the key advantages of SoundHound AI is its rapid revenue growth. In the latest quarter (fiscal 2025's Q3), the company grew its revenue by 89% year over year to $25.1 million. This growth was also helped by a partial quarter of revenue from its Amelia acquisition that closed in August. However, SoundHound AI's gross margins are relatively low compared to GitLab, with gross margins of 49% in the latest quarter. This is an important factor to consider, as higher gross margins mean that revenue more easily flows to profits.

GitLab (GTLB)

GitLab operates a DevSecOps platform that software developers use to help create software in a secure environment where cybersecurity has been integrated throughout the entire development process. The company also offers customers AI-powered tools that help programmers write code by offering suggestions and through automation. GitLab's primary focus is on providing a platform for secure software development.

One of the key advantages of GitLab is its strong revenue growth and higher gross margins. In the latest quarter, GitLab grew its revenue by 31% to $196 million. The company has grown its revenue by 30% to 40% each of the past six quarters. GitLab's gross margins are much higher than SoundHound AI's, with gross margins of 89% in the latest quarter. This is important, as higher gross margins mean that revenue more easily flows to profits.



Conclusion

When comparing SoundHound AI and GitLab, it is clear that GitLab has a more established, solidly growing business with a much higher gross margin. SoundHound AI, on the other hand, has a larger opportunity but also a greater risk associated with it. Given GitLab's much cheaper valuation, vastly superior gross margins, strong revenue growth, and more established business model, it appears to be the better mid-cap AI stock investment for 2025.

However, it is essential to remember that investing in the stock market always involves some level of risk. Both SoundHound AI and GitLab are still relatively small companies with limited operating histories, and their future performance may be uncertain. Therefore, it is crucial to do thorough research and consider your risk tolerance before making any investment decisions.

Important note: This article is for informational purposes only and should not be considered as financial advice. Always consult with a licensed financial advisor before making any investment decisions.