In this article, we will take a look at the 10 best AI penny stocks to buy now. To see more such companies, go directly to 5 Best AI Penny Stocks to Buy Now.
The AI hype and news cycle does not show any signs of subsiding as companies keep announcing new products and services related to AI and people continue to deploy AI-related applications to increase their productivity in jobs and life. However, some analysts do believe the AI “bubble” that started with the launch of ChatGPT and pushed many stocks to record highs might be close to popping. For example, Morgan Stanley strategist Edward Stanley recently said in a note that if Nvidia was a proxy for the AI bubble, it's nearing its peak. Nvidia started to surge after the company earlier this year gave a strong guidance on expectations that generative AI applications will boost the demand of its chips. However, the analyst said that unlike Nvidia the gains in the broader AI-related indices have been modest. For example, the MSCI USA IMI Robotics & AI Select Net USD Index was up about 50% year to date through July 31. But Nvidia's latest quarterly report proved Stanley's skepticism wrong. However, in the long term, Nvidia shares may lose their gains as some analysts believe the stock's valuation has become extremely high.
AI's Era of Deployment Begins
Bubble or not, the rise of AI will create unending opportunities for the general public and industry. According to a report by Stanford University, AI has entered an era of “deployment” where large language models are released by companies and people are using AI applications directly. The report said that this revolution will create a lot of risks and opportunities. For example, the report counts the problem of AI-based deepfake videos as one of the biggest risks in the modern world.
However, the report also highlighted how AI will create new job opportunities in the industry. The report said that the number of AI-related job postings has increased on average from 1.7% in 2021 to 1.9% in 2022. While the report did not mention any data for 2023, the number of jobs in the AI domain are slated to skyrocket in 2023 and beyond since we are in the very early stages of the AI revolution and companies would need people for a lot of AI-related roles to tap into different opportunities.
The Stanford report also cites data from labor market data company Lightcast, which analyzed millions of job posting since 2010 to find out the trends in AI-related job openings. The report said that machine learning is one of the most in-demand skills in the AI segment, followed by a rather generic category labeled “artificial intelligence.” Neural networks, natural language processing, robotics, visual image recognition and autonomous driving technologies are some of the other top skills that are in demand in the US in the AI spectrum.
The report also talked about investments in the AI space. Interestingly, the report said that in 2022, total global corporate AI investment was $189.6 billion, which was about a third lower than it was in 2021.
Goldman Sachs published an interesting report in July entitled “Generative AI: Hype or Truly Transformative” and addressed the question of opportunities in AI and valuations. The report had an interesting section which said:
“GS US internet analyst Eric Sheridan, for his part, is somewhat comforted by the fact that the vast majority of companies that have recently outperformed on the AI theme are still trading at relatively reasonable multiples to GAAP EPS. And Rangan makes the case that unlike other large technology cycles—such as the shift from distributed systems to cloud computing— where objections from established players slowed adoption,the most powerful technology companies in the world are driving this shift, so AI probably isn’t in a hype cycle. So where are the most compelling AI investing opportunities today? Rangan and Sheridan argue that the large tech companies developing the foundational AI models, as well as the “picks and shovels” businesses serving the space— semiconductor companies, cloud computing hyperscalers, and infrastructure companies—are well positioned to capture gains during the current “build” phase. Guo agrees, but also sees opportunities across the stack, and is most excited about the application layer that the broader investor base seems less sure about today."
For this article, we scoured Insider Monkey’s database of 943 hedge funds and picked 10 AI penny stocks with the highest number of hedge fund investors as of the end of the first quarter.
iCAD, Inc. (NASDAQ:ICAD) is a medical device manufacturers whose products are used for early detection of breast, prostate and colorectal cancers. iCAD, Inc. (NASDAQ:ICAD) is using AI in its products. For example, iCAD’s ProFound AI® solution is used in cancer detection systems.
As of the end of the first quarter of 2023, 7 hedge funds in Insider Monkey’s database of 943 funds reported having stakes in iCAD, Inc. (NASDAQ:ICAD). The biggest stakeholder of iCAD, Inc. (NASDAQ:ICAD) during this period was George Mccabe’s Portolan Capital Management which owns a $1.1 million stake in the company.
9, Rekor Systems Inc (NASDAQ:REKR)
Number of Hedge Fund Holders:8
Rekor Systems, Inc. (REKR) is a unique company providing infrastructure solutions for transportation management, public safety, and urban mobility markets. The company is using AI for public safety. It made headlines recently after its AI systems and software played a key role in the arrest of a drug trafficker.
Canaan Inc. (NASDAQ:CAN) is a Chinese hardware company that is known for its chips used in blockchain and crypto mining servers. Canaan Inc. (NASDAQ:CAN)’s products are also used in AI systems. For example, its Kendryte K510 is a Linux-based RISC-V high precision AI processor used for image and audio processing.
As of the end of the first quarter of 2023, 8 hedge funds tracked by Insider Monkey reported having stakes in Canaan Inc. (NASDAQ:CAN). The most significant stakeholder of Canaan Inc. (NASDAQ:CAN) was Ryan Caldwell’s Chiron Investment Management which owns a $2.9 million stake in the company.
Semiconductor company Himax Technologies, Inc. (NASDAQ:HIMX) is behind several AI-related products. For example, Himax Technologies, Inc. (NASDAQ:HIMX) makes WE1 Plus, an AI accelerator-embedded ASIC platform for ultralow power applications. Himax Technologies, Inc. (NASDAQ:HIMX) shares have gained about 6% year to date through August 7.
As of the end of the first quarter of 2023, 9 hedge funds in Insider Monkey’s database of 943 hedge funds reported owning stakes in Himax Technologies, Inc. (NASDAQ:HIMX). The biggest stakeholder of Himax Technologies, Inc. (NASDAQ:HIMX) during this period was Steve Cohen’s Point72 Asset Management which owns an $11.42 million stake in the company
In its Q1 earnings call Himax Technologies, Inc. (NASDAQ:HIMX)’s management talked about its AI produce WiseEye:
“Next for an update on our next generation WE2 AI processor which builds upon its industry leading WE1 processor and performs contextual awareness AI particularly in detecting user engagement levels based on more subtle presence or movement. WE2 is designed with advanced computer vision engines that can recognize images over a longer distance at much enhanced accuracy, speed, power efficiency and inferencing performance. Based on its superb AI processing capabilities, WE2 can enable more comprehensive and detailed types of object detection such as facial landmark, hand landmark and body skeleton to perceive complex human body movement, enabling high-precision AI detection for a wide range of applications and use cases in real life. We have gained significant traction for next generation smart notebook, targeting to hit the market starting 2024, where we are making solid design progress with leading top brands — leading laptop brands as well as CPU and AP SoC partners to jointly work on the enrichment of new AI features on notebooks.
Perfect Corp. (NYSE:PERF) uses AI and Augmented Reality (AR) in the online beauty and fashion business space.
As of the end of the first quarter, 10 hedge funds in Insider Monkey’s database of funds had reported owning stakes in Perfect Corp. (NYSE:PERF).
During the second quarter, Perfect Corp. (NYSE:PERF)’s revenue jumped about 12% year over year to $12.7 million, missing estimates by $0.27 million. Gross profit in the period was $10.2 million, compared to $9.7 million reported in the same period last year.
