2 Small-Cap Artificial Intelligence (AI) Stocks to Buy Right Now

Companies like Nvidia, Microsoftand Amazon have become synonymous with artificial intelligence (AI). These trillion-dollar giants are among the highest-quality companies investors can buy, but smaller names can also represent promising AI opportunities.

C3. have (AI -0.62%) was one of the first artificial intelligence companies in the world when it was founded in 2009 and SoundHound AI (SOUND -2.65%) has become a leader in conversational AI. The latter even won the approval of Nvidia, which acquired a stake in the company late last year.

C3.ai and SoundHound have market caps of $3.1 billion and $1.8 billion, respectively, but could grow in value as the AI ​​revolution unfolds.

1. C3.ai: A unique enterprise AI company

Oracle Chairman Larry Ellison recently stated that the cost of building a true, state-of-the-art AI model from scratch could exceed $100 billion. That’s why many companies choose to use third-party ready-made models like OpenAI or Anthropic when building AI software. However, with C3.ai, they can skip that step entirely (depending on their needs).

C3.ai offers a portfolio of over 40 completed AI applications that can be customized to fit almost any business in as little as three months from the date of the first meeting. In fact, the company has customers in 19 different industries, including financial services, manufacturing, and oil and gas, to name a few.

One of the largest chemical producers in the world, Dowuses the C3.ai Reliability platform for predictive maintenance. It achieved a 20% reduction in equipment downtime, which is such a strong result that it is deploying the software to more of its assets.

C3.ai sells its AI applications directly to customers, but also sells them together with the cloud divisions of tech giants such as Microsoft, Amazon and Alphabet. It’s a win-win for all parties — cloud providers can offer their customers more options when it comes to AI, and C3.ai gets access to a large number of businesses it can sell its software to. In the first quarter of fiscal 2025 (ended July 31), C3.ai’s partner network accounted for 72% of its transaction flow, making it a valuable sales channel.

The company generated a record $87.2 million in revenue during the quarter, up 21% from the year-ago period. It marked the sixth consecutive quarter of accelerating revenue growth as the company reaps the benefits of the move to consumption-based pricing, which was set in motion two years ago. Based on management guidance, revenue growth could accelerate again in the fiscal second quarter.

C3.ai stock is trading over 85% below its all-time high, which was set during the tech frenzy of 2020. It was arguably overvalued when the price-to-sales ratio (P/S) exceeded 80. It has now fallen to a more reasonable level of 9.1, below the three-year average of 10.5. That’s still a premium valuation, but you can justify it with the company’s accelerating revenue growth.

2. SoundHound AI: A leader in conversational AI

Like C3.ai, SoundHound AI has also developed a portfolio of AI tools for business. It focuses on conversational AI applications that are capable of voice interactions with their users, making them extremely useful in places like restaurants or inside the car.

SoundHound enables restaurants to take customer orders using artificial intelligence, whether in-store, over the phone or in the drive-thru, without the need for human intervention. Additionally, its Employee Assist software can talk to workers about store policies or even provide instructions on how to create certain menu items.

Several popular restaurant chains use SoundHound products, including Chipotle Mexican Grill, Papa Johnsand “O” Brady beef. The latter has just launched AI ordering in all its corporate locations and is also offering franchisees the option to use it.

SoundHound’s AI Chat voice assistant is popular in the automotive industry. It’s already live at six brands below Stellar umbrella and is able to provide drivers with information on a wide range of topics, from sports scores to the status of an upcoming flight. SoundHound uses Nvidia’s Drive platform to power its voice interface, which allows Chat AI to work even when there’s no internet or cellular connection. So not only did Nvidia buy a small stake in SoundHound, but the two companies are working closely together.

SoundHound generated revenue of $45.9 million in 2023, and management’s guidance calls for the top line to grow 74% to $80 million this year. The company’s outlook also anticipates accelerating growth in 2025 as revenues reach $150 million.

Part of the strong forecast is due to SoundHound’s recent acquisition of Amelia, an AI company that helps companies build AI agents to serve their customers and employees. Amelia is expected to contribute $45 million to SoundHound’s revenue next year, which is included in the forecast above. The acquisition will expand SoundHound’s reach into new industries such as healthcare, financial services and insurance.

SoundHound shares are trading at a P/S ratio of 23.9 at the time of writing, nearly triple stock valuation C3.ai. While it’s expensive, its P/S ratio shrinks to 11.5 based on management’s 2025 earnings outlook. That said, investors will need to adopt a long-term mindset as SoundHound heads toward continued advancement of AI technology.