Top AI Stocks to Buy in May and One to Avoid: SoundHound and Upstart Lead the Charge, Palantir Faces Challenges
22min read The AI revolution is in full swing, with select companies leading the charge in voice technology, fintech, and healthcare automation. As May 2025 unfolds, investors must navigate a sector ripe with opportunity—and risks. Below are two AI stocks positioned to outperform, and one to avoid due to looming challenges.
Ask Aime: Which AI stocks will thrive in May 2025?
1. SoundHound AI (SOUN): Voice Tech Dominance
1-Year Return (as of April 2025): 128.42%
SoundHound AI is the top performer in the Indxx Global Robotics & Artificial Intelligence Thematic Index, driven by its voice-based solutions for automotive, hospitality, and food service industries. Clients like Hyundai, Pandora, and Krispy Kreme rely on its voice assistants to streamline customer interactions, from order placement to reservation systems.
Ask Aime: Which AI stock is leading the voice technology market?
Why Buy Now?
- Market Leadership: SoundHound’s voice recognition technology is unmatched in its target industries, with partnerships spanning global brands.
- Growth Catalysts: The rise of voice-driven commerce and autonomous vehicles positions it to capture a growing market.
- Valuation: Despite its high return, its price-to-sales (P/S) ratio of 2.5 remains reasonable compared to peers.
Ask Aime: Should I buy SoundHound AI stock?
2. Upstart Holdings (UPST): Democratizing Lending with AI
1-Year Return (as of April 2025): 109.74%
Upstart is revolutionizing lending by using AI to assess creditworthiness, enabling borrowers—particularly those from marginalized communities—to access loans that traditional banks might reject. With nearly 3 million customers, its platform connects users to financial institutions, leveraging machine learning to reduce risk while expanding access.
Why Buy Now?
- Inclusive Finance: The demand for fair lending solutions is surging, and Upstart’s AI-driven model aligns with regulatory trends favoring financial inclusion.
- Scalability: Its revenue grew 60% in 2024, and its AI algorithms improve with more data, creating a compounding advantage.
- Valuation: Trading at a forward P/E of 35, it’s attractively priced given its growth trajectory.
1 to Avoid: Palantir Technologies (PLTR)
Stock Performance (2024): Surged 340%, but faces near-term risks.
Palantir’s data analytics tools serve governments and enterprises, but its reliance on U.S. federal contracts makes it vulnerable to macroeconomic headwinds. President Trump’s proposed cost-cutting measures and Pentagon spending reviews threaten its revenue stability.
Why Avoid Now?
- Policy Risks: A Trump administration’s focus on austerity could slash Palantir’s government contracts, which account for 60% of revenue.
- Market Volatility: Its stock is near critical support levels (200-day EMA), and geopolitical tensions may deter institutional buying.
- Valuation: Despite a 340% 2024 rally, its P/E of 100+ is unsustainable without sustained growth.
Conclusion: AI’s Winners and Losers in 2025
The AI sector is bifurcating between companies with tangible applications and those overvalued by hype. SoundHound (SOUN) and Upstart (UPST) stand out for their proven revenue growth and sector-specific dominance in voice tech and fintech. Conversely, Palantir (PLTR) faces structural risks tied to government spending and overvaluation.
Investors should prioritize firms with scalable AI applications (like SOUN’s automotive partnerships) and clear monetization paths (UPSTART’s lending platform). Meanwhile, Palantir’s reliance on volatile government contracts makes it a risky bet until macroeconomic clarity emerges.
As the AI race intensifies, remember: execution beats ambition. Companies delivering real-world solutions—rather than speculative promises—will lead the way.
Data as of April 25, 2025. Past performance does not guarantee future results.
