2 AI Stocks to Watch in 2026: SoundHound AI (NASDAQ: SOUN) and Microsoft (NASDAQ: MSFT)

Here is one pure-play AI stock and one AI hyperscaler that investors should watch closely as AI adoption and spending continue to accelerate.

1. SoundHound AI, Inc. (NASDAQ: SOUN)

SoundHound AI, Inc. (NASDAQ: SOUN) had a record second quarter as revenue reached US$61.9 million, up 45% year-over-year. First-half revenue also rose to US$106.1 million from US$71.8 million a year earlier, while its current market capitalisation is US$3 billion.

The company posted a GAAP gross margin of 45%, which was six percentage points higher than a year earlier, while its adjusted EBITDA loss fell 33% year-over-year.

OASIS and Agentic AI Growth

A major growth driver for SoundHound is OASIS, its self-building and self-optimising agentic AI platform. Management said it is helping turn demonstrations and pilots into contracts faster, including an eight-figure customer commitment signed within 90 days of the initial demonstration.

Demand is also growing across healthcare and financial services, as well as automotive and restaurants. The company reported seven healthcare deals in Q2, along with major automotive wins in Asia and further expansion with global restaurant brands.

The long-term opportunity may benefit from the rapid growth of agentic AI. SoundHound is developing its own foundation models and specialised large language models, which could improve accuracy and efficiency as well as control and margins as the technology scales.

Acquisition and Financial Position

Another key catalyst is the planned acquisition of LivePerson, which SoundHound expects to complete before the end of 2026.

The company had US$203 million of cash and cash equivalents with no debt at the end of Q2.

Management has also raised its full-year 2026 revenue guidance to US$230 million–US$260 million as SoundHound has a plan to expand within existing customers and attract new clients while also improving cost efficiency.

2. Microsoft Corporation (NASDAQ: MSFT)

Microsoft Corporation (NASDAQ: MSFT) represents the AI hyperscaler side of the comparison, with a current market capitalisation of US$3.72 trillion. The company achieved a record FY26, with annual revenue above US$331 billion, up 18% year-on-year.

Microsoft Cloud revenue also topped US$214 billion after rising 27%, while Azure revenue passed US$100 billion with growth of 41%.

Azure and Cloud Growth

In Q4, Microsoft posted revenue of US$90 billion, up 18%, while operating income rose 18% and adjusted earnings per share climbed 23% to US$4.74.

Its gross margin stood at 67% as the business shifted towards Azure and the company made heavy investments in AI infrastructure.

Azure remains the main growth engine. Intelligent Cloud revenue rose 32% to US$39.3 billion, while Azure and other cloud services grew 43% because customer demand exceeded available capacity.

Microsoft is making large investments to meet this demand, with 31 new datacentres added in the latest quarter, plus another gigawatt of capacity. Overall capacity is targeted to roughly double within two years, while quarterly capital expenditure reached US$41 billion.

Expanding AI Ecosystem

Microsoft's AI ecosystem is also expanding fast, with:

• More than 30 million paid Microsoft 365 Copilot seats

• 100,000 Foundry customers

• Nearly 40 million agents registered through Agent 365

• GitHub reaching 225 million users

• 50 million GitHub Copilot users

Microsoft also has a major monetisation opportunity as it shifts beyond traditional per-seat licensing toward seat-plus-consumption pricing, which could raise revenue as customers use more AI.

(Source: Company Announcements)