You are likely aware of the surge in popularity of artificial intelligence (AI) stocks over the past year, unless you’ve been disconnected from the financial world. Investors are eagerly seeking opportunities in this sector, with new AI-related companies consistently reaching new heights each quarter. The fear of missing out (FOMO) is palpable, given the transformative impact of AI on businesses and its immense growth potential.
However, many of the highly valued IoT stocks in the spotlight are currently trading at astronomical levels. While they may continue to rise, the risk of a significant downturn is also substantial. A single misstep or underwhelming earnings report could cause these stocks to plummet.
So, what should a savvy investor do in this scenario? It may be time to look beyond the hyped-up names and delve deeper into the market. There are numerous hidden gems in the AI sector that have yet to receive full recognition from Wall Street. These companies may operate in overlooked markets or quietly deliver results while others grab the spotlight.
These under-the-radar AI firms present significant opportunities for substantial returns. The growth potential is vast, especially considering that the AI trend is still in its early stages. Here are three standout companies in this space:
Upstart (UPST)
Upstart (NASDAQ: UPST) has been on my radar for quite some time, and for good reason. Since my optimistic outlook in April 2023, the stock has surged by 400% at its peak. Despite a slight pullback, it still boasts a substantial 75% gain. I believe Upstart has room to continue its upward trajectory.
The current economic climate has posed challenges for Upstart’s growth, as banks are cautious about adopting new technologies during uncertain times. Additionally, consumer behavior, such as delaying large purchases like vehicles and homes due to rising interest rates, has impacted Upstart’s business model, which focuses on leveraging non-traditional factors like education and employment for credit assessment.
However, as interest rates are expected to decline and Upstart forges more partnerships, the company’s growth prospects are promising. Recent financial results indicate a positive trend, with revenue increasing and exceeding expectations in the third quarter. Analysts project earnings of 19 cents per share in 2025 and 60 cents per share in 2026, with revenue forecasted to climb from \(581 million in 2024 to \)888 million in 2026.
Mitek Systems (MITK)
Mitek Systems (NASDAQ: MITK) specializes in fraud detection systems, particularly in identifying fake authentication and combating the emerging threat of AI deepfakes. With the proliferation of advanced AI models like OpenAI’s Sora text-to-video technology, the risk of sophisticated fake videos is on the rise.
As the battle against AI deepfakes intensifies, Mitek’s expertise in fraud detection is poised for significant growth. Despite trading at discounted valuations, Mitek has the potential to rebound strongly and expand its margins, driving revenue growth to new heights.
Data Storage Corp (DTST)
Data Storage Corp (NASDAQ: DTST) capitalizes on the booming cloud computing and data backup sectors. Despite a recent setback in Q4 earnings, the company has shown resilience and profitability, with strong revenue growth projections for the future.
While DTST may have missed revenue estimates in the past quarter, this setback is already factored into the stock price. As Data Storage Corp continues to enhance profitability and revenue streams, there is substantial upside potential for investors.
In conclusion, these under-the-radar AI companies offer compelling growth opportunities for investors willing to look beyond the mainstream headlines. By exploring these hidden gems, investors can potentially unlock significant returns in a rapidly evolving sector.
Omor Ibne Ehsan is a blogger at InvestorPlace, specializing in growth stocks with solid fundamentals and long-term potential. His investment focus includes high-risk assets like penny stocks and cryptocurrencies. You can connect with him on LinkedIn.
