If you are sick of hearing about artificial intelligence (AI) on Wall Street, I have some bad news. This theme is unlikely to go away anytime soon. The market is incredibly broad, spanning technologies like voice recognition, robotics, machine learning (ML), natural language processing, autonomous vehicles, and more.

The field of artificial intelligence could have a combined annual market of over $800 billion by 2030, according to Statista. Generative AI -- as used in ChatGPT, Perplexity, and Alphabet's Gemini -- is also expected to grow at a breakneck pace. For perspective, Microsoft and Nvidia had combined sales of $367 billion over the last 12 months.

Image source: Statista.

It's easy to see why companies are scrambling for a chunk of this market, and investors are following suit. The enthusiasm sent some stocks soaring in 2024. As I write this, Palantir Technologies (PLTR 4.30%) stock is up 335% year to date, while SoundHound AI (SOUN -4.51%) has gained an astounding 811%.

Will this continue in 2025? Here are a few things to consider.

Why SoundHound AI stock is soaring

Automated ordering at the drive-thru and fast-casual restaurants is coming to a town near you. There are too many cost-saving incentives for businesses not to make the transition now or in the near future. More sophisticated voice-recognition virtual assistants are also going into new vehicles. The technology allows for conversational communication and pulls answers from a vast database.

For instance, you can ask for directions to the highest-rated nearby Italian restaurant within 10 miles, what the weather will be like at 5 p.m. on Saturday, or what the most scenic route is.

SoundHound's proprietary technology powers these platforms, and the company continues to win new customers, driving the stock to all-time highs. In December alone, Church's Chicken piloted the technology at some locations, and Torchy's Tacos implemented SoundHound's Voice AI phone ordering system at all locations.

Revenue increased 89% year over year in Q3 to $25 million. SoundHound expects total sales of $82 million to $85 million in 2024, potentially doubling this to $155 million to $175 million in 2025.

The growth is incredible, but SoundHound is not profitable or producing positive cash flow from its operations. The company reported an operating loss of $84 million and a $76 million operating cash flow loss through three quarters of 2024. Losses aren't unusual for a fast-growing tech company, but investors should know the risk.

SoundHound stock's incredible run is pushing valuation boundaries to an extreme level. As shown below, the stock trades for over 90 times sales and 45 times the 2025 analyst forecast.

SOUN PS Ratio data by YCharts

These ratios are incredibly high for any company -- and definitely for an unprofitable one. This doesn't make SoundHound a bad stock to own long term, but echoes of the 2021 tech bubble are appearing in the market. I was bullish on the stock recently, but much less so after the terrific run. Buyers of SoundHound at the current price should expect some drastic swings in the price over the next couple of years.

Is Palantir stock a good buy now?

Palantir, another AI highflier, saw a significant boost due to its Artificial Intelligence Platform (AIP). AIP uses generative AI to assimilate data and assist with making high-level decisions by interacting with people in defense and the private sector conversationally.

One example that Palantir gives is a wholesale company that will experience downtime in one location due to inclement weather. AIP assists with determining the optimal rerouting and showing the impact on profits. In another example for the defense sector, assume a hostile force is amassing near a border. AIP can show the resources available to the commander and suggest possible enemy formations.

These impressive features spurred Palantir's commercial and total customer growth, as shown below.

Image source: Palantir.

Total sales reached $726 million in Q3, a 30% increase, and Palantir's operating income soared from $40 million to $113 million year over year, showing the success of the AIP product.

The stock has a market capitalization of $169 billion, or 60 times sales guidance for 2024. While the valuation is more palatable than SoundHound's, it is by no means a value. Both companies are doing exciting things in AI and look like long-term winners. Although there is considerable downside risk, the stocks could continue to rise in 2025 -- but don't expect the same exponential gains as this year.

Don't fret if you missed the spectacular gains, there are tons of excellent companies to invest in. A significant dip could come anytime, and AI has a long runway.