Investing in a rapidly growing sector like artificial intelligence (AI) can be lucrative for long-term gains. However, it’s essential to note that established players such as Advanced Micro Devices (NASDAQ: AMD) may not offer the same level of AI-driven growth potential due to market saturation.
Despite AMD’s impressive 90% year-over-year stock surge fueled by the AI narrative and consistent earnings beats, there is a possibility that the AI story is already factored into its valuation. In light of this, exploring opportunities in overlooked small-cap AI stocks could be a strategic move.
Let’s delve into three promising small-cap AI companies that have the potential for substantial growth:
BigBear.ai Holdings, Inc. (BBAI)
BigBear.ai Holdings (NYSE: BBAI) specializes in decision intelligence solutions across various sectors like logistics, enterprise operations, autonomous systems, and cybersecurity. The company caters to diverse markets, including government and defense, manufacturing, warehousing, and healthcare.
Despite being a nascent player in the industry, BigBear.ai shows significant promise. The complexity of the AI-driven business transformation necessitates the involvement of third-party entities like BigBear.ai. The AI consulting market is projected to grow by 26.49% annually until 2031, indicating substantial opportunities for growth.
In its recent fourth-quarter report, BigBear.ai disclosed \(40.56 million in revenue and a loss of 14 cents per share. While currently operating at a loss, the company is scaling rapidly, targeting a full-year revenue range of \)195 to \(215 million. With additional cash proceeds of \)54 million secured last year, BigBear.ai has ample room for reinvestment and low solvency risk. The company’s robust growth trajectory suggests a path towards profitability.
Considering BBAI stock’s price-to-sales ratio of 1.97x below the sector median of 3.03x, there is potential for undervaluation, hinting at asymmetric returns and solid fundamentals.
Innodata, Inc. (INOD)
Innodata (NASDAQ: INOD) plays a crucial role in the AI value chain by offering data collection and training solutions to external entities. Data collection, cleansing, and training are pivotal yet challenging aspects of data analysis, making Innodata’s services indispensable.
Innodata reported \(26.1 million in fourth-quarter revenue, marking a 35% year-over-year increase. The company also achieved quarterly EBITDA of \)4.3 million and a net income of \(1.7 million, a significant turnaround from the previous year’s \)2 million loss.
From a technical standpoint, INOD stock has shown resilience despite a recent 20% decline since the beginning of the year. Key metrics suggest a potential turnaround, with the stock breaching its 10-day moving average and a low Put/Call ratio of 0.29x indicating bullish sentiment among options traders.
Innodata’s stock appears poised for growth.
Duos Technologies Group (DUOT)
Duos Technologies (NASDAQ: DUOT) specializes in enterprise information management and AI algorithm development and deployment, catering to clients such as the U.S. Department of Homeland Security, Amtrak, Ferromex, and Metra.
The company’s reputation among reputable end-market clients underscores its credibility. Duos Technologies recently secured a \(2.4 million AI agreement with a Class 1 railroad, showcasing its revenue potential despite its current annualized revenue base below \)12 million.
With a nearly 50% year-to-date stock surge, Duos Technologies has surpassed its 50- and 100-day moving averages, indicating positive momentum. While the stock remains far from overbought based on its relative strength index in the mid-50s, suggesting further upside potential.
DUOT stock presents a compelling opportunity for growth, albeit with inherent risks.
On Penny Stocks and Low-Volume Stocks: It’s crucial to note that low-volume stocks with market caps below $100 million are often prone to manipulation and scams. InvestorPlace typically avoids discussing such stocks to protect investors from potential risks.
In conclusion, exploring small-cap AI stocks like BBAI, INOD, and DUOT could offer investors exposure to untapped growth opportunities in the AI sector. Each company brings unique strengths and growth prospects, making them intriguing options for those seeking to capitalize on the AI industry’s expansion.
