Innodata vs. SoundHound AI: Which Technology Stock Is a Better Buy in 2026?
2026-09-28 20:27
•Anders Bylund •The Motley Fool
••••••• ••••• Axe Cap view
Innodata or SoundHound AI: Which AI Play Holds More Weight?
Weighing profitability against growth in AI tech with an eye on the JSE and the rand.
Looking at Innodata, you get a solid performer with steady 47.6% revenue growth and profitability—a rare feat for AI-focused firms. Yet, nearly 60% of its revenue comes from one big client, likely Meta, which is a double-edged sword. Meta’s stake in Scale AI hints at in-house competition that could quickly clobber Innodata’s business. SoundHound AI, on the other hand, nearly doubles Innodata’s revenue growth but still burns cash. Their acquisition of LivePerson broadens their footprint in conversational AI, a niche with massive potential. The trade-off here is clear: Innodata offers safety and steady returns in a volatile market, while SoundHound’s high risk could pay off if it turns profitable. For JSE investors, this signals caution. The rand (USD/ZAR) tends to react to tech-sector optimism or jitters—expect volatility if global AI stocks falter. Given the weak link between these US names and local stocks, currency will be your main local exposure. This view might be wrong if Innodata manages to diversify away from Meta or if SoundHound stumbles on its path to profitability. this is just our opinion and not financial advice
Avoid Innodata due to customer concentration risk and slow growth. Watch SoundHound cautiously; you might consider a small, speculative position if you tolerate risk. Hedge exposure through the rand by monitoring USD/ZAR moves linked to global tech sentiment.
- USD/ZAR
- INOD
- SOUN
- Meta reducing business with Innodata
- SoundHound failing to reach profitability
- Rand volatility linked to tech sector swings
5/10
The article compares two AI-focused technology stocks: Innodata, which provides data engineering services for large language models with 47.6% revenue growth and profitability, versus SoundHound AI, which offers conversational AI platforms with 99.4% revenue growth but ongoing losses and negative cash flow. Despite Innodata's stronger financial metrics and lower valuation, the author recommends SoundHound AI as the better long-term buy due to its massive addressable market, recent LivePerson acquisition, and potential path to profitability, though acknowledging it carries higher risk.
Our take is based on reporting first published by The Motley Fool.