In this article, we’re going to talk about the 10 best AI penny stocks to buy according to analysts.
Kim Forrest, chief investment officer at Bokeh Capital Partners, recently appeared on CNBC’s ‘The Exchange’ on November 13 to discuss why tech could be a winner in a new Trump administration, focusing her discussion on the current state of AI, particularly the distinction between large language models and smaller, targeted AI solutions.
Forrest noted that while LLMs have garnered significant attention and represent impressive technological advancements, they are not without their flaws. Specifically, she pointed out that these models are still prone to errors, which can hinder productivity and limit their practical applications in real-world scenarios. This concern leads her to advocate for what she refers to as small AI, which emphasizes targeted solutions aimed at addressing specific problems rather than attempting to cover a broad spectrum of tasks.
Her background as a software engineer and her experience working with AI tools have shaped her perspective on the matter. She believes that smaller, more focused AI models will ultimately prove to be more effective in driving productivity gains. Unlike the more complex and exotic LLMs that may resemble something out of science fiction, like HAL 9000 from “2001: A Space Odyssey”, small AI solutions are designed to tackle particular challenges efficiently. Forrest argues that this targeted approach is where true productivity can be realized, making small AI a compelling area for future development and investment.
When discussing investment opportunities in the tech sector, she highlighted several key players in the semiconductor industry that are essential for powering AI technologies. NVIDIA was noted as a natural leader in this space due to its dominance in graphics processing units (GPUs) that are crucial for AI computations. However, she also expressed continued confidence in AMD, despite its recent struggles in the market.
In addition to semiconductor companies, Forrest pointed out opportunities within software firms that are leveraging AI technologies. Microsoft was cited as a prime example, the company is actively working on providing access to LLMs while also narrowing focus to practical applications. For instance, it’s developing finance-oriented GenAI tools designed specifically for accounting tasks. This kind of targeted application exemplifies how LLMs can be adapted for specific industries, enhancing their utility and effectiveness.
Forrest also mentioned C3.ai as another noteworthy player in the AI space. It offers targeted AI solutions but has a significant service component mixed into its revenue model. While this diversification can provide stability, she cautioned that it may also limit scalability compared to bigger companies, which primarily focus on software products with higher margins. She emphasized the importance of understanding the business models of these companies when considering investment opportunities.
Overall, her insights reflect a nuanced understanding of the current tech landscape and the potential of both small and large AI solutions. She advocates for a balanced investment strategy that recognizes the strengths and weaknesses of various companies within the AI ecosystem. As AI continues to evolve, Forrest’s perspective underscores the critical need for investors to remain adaptable and informed about emerging trends and innovations in this dynamic field, which is why we’re here with a list of the 10 best AI penny stocks to buy according to analysts.
Methodology
We used ETFs, stock screeners, and financial media reports to compile an initial list of the top AI penny stocks, with a share price under $5. From that list, we narrowed our choices to 10 AI penny stocks that analysts were the most bullish on. The stocks are ranked in ascending order of analysts’ upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best AI Penny Stocks to Buy According to Analysts
10. POET Technologies Inc. (NASDAQ:POET)
Average Upside Potential: 37.08%
Share Price as of November 5: $3.60
Number of Hedge Fund Holders: 1
POET Technologies Inc. (NASDAQ:POET) specializes in developing advanced optical technologies for AI applications, particularly through its innovative POET Optical Interposer platform. This platform enables integrating electronic and photonic devices on a single chip, allowing for high-speed data processing with lower power consumption than traditional semiconductor solutions. By utilizing light for data transmission instead of electrical signals, its products significantly enhance the performance and efficiency of AI systems.
The company has gained recognition for its contributions to AI infrastructure, winning multiple awards for its optical solutions. In October, the company received the “AI Innovator of the Year” Gold Prize at the 2024 Merit Awards and the “Best in Artificial Intelligence” category at the 2024 Global Tech Awards, solidifying its position as an AI industry leader.
It secured a major design win with Foxconn Interconnect Technology (FIT) in FQ4 2024 to supply 800G and 1.6T optical engines for AI and data center networks. Luxshare Tech, an Apple supplier, expanded its optical module portfolio using its optical engines.
POET Technologies Inc. (NASDAQ:POET) and Mitsubishi Electric Corporation recently joined forces to develop integrated optical engine chipsets for 3.2T pluggable transceivers, essential for optical connectivity in the rapidly expanding AI networking market. Mitsubishi Electric will provide 400G EMLs, while POET Technologies Inc. (NASDAQ:POET) will integrate them using its optical interposer platform. The goal is to produce 1.6T and 3.2T chipsets by early 2025.
This partnership addresses the increasing demand for high-speed optical connectivity in AI and cloud data center networks. Driven by such strides, the company demonstrates its ability to become a leader in its industry.
9. Perfect Corp. (NYSE:PERF)
Average Upside Potential: 69.79%
Share Price as of November 5: $1.93
Number of Hedge Fund Holders: 9
Perfect Corp. (NYSE:PERF) is a technology company that uses AI and AR to provide innovative solutions primarily for the beauty, fashion, and skincare industries. It offers a range of AI-driven tools, including virtual makeup applications, skin analysis, and personalized hair color recommendations. Its flagship products, such as the YouCam app suite, allow users to experiment with beauty products virtually, enhancing customer engagement and shopping experiences.
By integrating AI and AR technologies, the company helps brands improve their digital transformation efforts while also focusing on sustainability and social responsibility within the beauty sector. It achieved strong growth in Q3 2024, driven by its AI/AR cloud solutions. Quarterly revenue totaled $16.13 million, an improvement of 10.85% year-over-year. The AI/AR cloud solution and subscription revenue grew 17.9%.
Its AI-powered skin diagnostics and virtual try-on solutions continue to perform well. However, the third quarter saw increased R&D, up 5.9%, primarily due to hiring more people and investing in new technologies like GenAI. Perfect Corp. (NYSE:PERF) also launched Perfect GPT, an AI-powered personalized beauty assistant recently, which is expected to be commercially deployed in early 2025. The company is confident in its ability to capitalize on expanding market opportunities and sustain long-term growth.
8. Lantronix Inc. (NASDAQ:LTRX)
Average Upside Potential: 76.77%
Share Price as of November 5: $3.77
Number of Hedge Fund Holders: 13
Lantronix Inc. (NASDAQ:LTRX) is a technology company that specializes in providing connectivity solutions for the Internet of Things (IoT) and Remote Environment Management (REM). It offers a range of products and services, including SaaS, intelligent hardware, and engineering services. Its solutions enhance connectivity and data management across sectors like smart cities, transportation, and healthcare. It focuses on integrating AI and edge computing into its offerings, enabling advanced applications like video collaboration and machine learning.
It introduced 5 new SiP (System-in-Package) solutions powered by Qualcomm Technologies to accelerate AI-driven applications, in October. These solutions offer enhanced AI capabilities, advanced video and AI features, and scalable AI solutions, empowering developers to create innovative AI-driven applications. Later the same month, it also launched SmartLV, an AI-powered IoT gateway for smart grids, which offers real-time control, visibility, and automation of low-voltage substations, enabling efficient energy management.
The company reported a 4.21% year-over-year increase in revenue for the first quarter of fiscal 2025. Its Embedded IoT Solutions segment experienced growth, with revenue increasing by 18% year-over-year. In contrast, IoT System Solutions revenue declined by 1%. IoT System Solutions revenue experienced a significant drop due to reduced shipments to a large customer and delayed government orders.
Its strategic focus on AI and IoT positions the company for significant growth. Its expansion into new markets, particularly in North America and Europe further strengthens its growth prospects. While short-term headwinds exist, the long-term outlook remains positive, driven by AI-powered innovations.
180 Degree Capital Corp stated the following regarding Lantronix, Inc. (NASDAQ:LTRX) in its Q2 2024 investor letter:
“More recently, we have been working behind the scenes with the management and board of Lantronix, Inc. (NASDAQ:LTRX) on ways to solidify the strong foundation of the company and set it up for success and significant value creation for stockholders in the future. We believe LTRX’s new CEO, Saleel Awsare brings an interesting and successful background to LTRX. What we believe he needed to be in the best position for success were board members who have experience navigating the challenges unique to microcapitalization companies. Following multiple discussions, we introduced Saleel and his board to Narbeh Derhacobian, the former Chief Executive Officer and founder of our former portfolio company, Adesto Technologies, Inc., and one of Adesto’s board members, Kevin Palatnik, who has significant experience as a CFO at multiple related businesses. We were pleased to see that LTRX’s board saw the same value that we do in these individuals, in terms of helping Saleel and his team to have the best opportunities to achieve multiple catalysts that could lead to material increases in value for LTRX and its stockholders.”
7. BigBear.ai Holdings Inc. (NYSE:BBAI)
Average Upside Potential: 89.87%
Share Price as of November 5: $1.61
Number of Hedge Fund Holders: 9
BigBear.ai Holdings Inc. (NYSE:BBAI) specializes in providing AI-powered decision intelligence solutions for sectors like national security, supply chain management, and digital identity. It utilizes advanced technologies such as machine learning and predictive analytics to help organizations make informed decisions in complex environments. Its services cater to clients in defense, transportation security, and logistics, among others. Solutions include data processing and visualization tools that enhance operational efficiency and support critical decision-making processes across industries.
The company reported its third-quarter 2024 financial results. Its revenue grew 22.12% to $41.51 million, driven by increased demand for its solutions. A key quarter highlight was securing a substantial 5-year production contract worth $165 million with the US Army to deliver the GFIM-OE. This project leverages AI to transform legacy systems into a modern, intelligent platform, enhancing data-centric force management.
BigBear.ai Holdings Inc. (NYSE:BBAI) remains optimistic about its long-term prospects, acknowledging the cautious approach of governments towards AI but emphasizing its team’s expertise and the value of its technology. The demonstration of ConductorOS, its AI orchestration platform, showcases its potential to revolutionize military operations.
In the civilian sector, its biometric verification solution, veriScan, is now operational at Denver International Airport. This deployment streamlines the boarding process for international passengers, highlighting the practical application of AI in everyday life.
Beyond these specific achievements, the company’s broader involvement in projects with the US Army and FAA demonstrates its ability to deliver complex AI solutions for government agencies. This positions it as a key player in the development and implementation of cutting-edge AI technologies.
6. Evolv Technologies Holdings Inc. (NASDAQ:EVLV)
Average Upside Potential: 137.34%
Share Price as of November 5: $2.25
Number of Hedge Fund Holders: 19
Evolv Technologies Holdings Inc. (NASDAQ:EVLV) is a security technology company focused on enhancing safety and security experiences through AI and advanced screening solutions. It’s known for its flagship product, Evolv Express, which uses AI to streamline security processes at venues like stadiums, theme parks, and airports. This system allows for contactless screening of individuals, improving efficiency while maintaining high safety standards. The company aims to transform physical security by making it more user-friendly and less intrusive.
In response to the growing threat of school violence, school districts across the US are turning to advanced security measures, including AI-powered gun detection systems. Companies like Evolv Technologies Holdings Inc. (NASDAQ:EVLV) Technologies are at the forefront of this trend, providing solutions to screen large numbers of people quickly and efficiently.
These AI-powered systems use advanced algorithms to analyze video feeds from security cameras, detect firearms, and send alerts to security personnel. Despite regulatory hurdles and controversies surrounding their effectiveness, these AI-powered solutions are gaining traction due to the rising demand for enhanced school security.
Evolv Technologies Holdings Inc. (NASDAQ:EVLV) continues to demonstrate strong growth potential. The company’s expansion into the industrial warehouse vertical, alongside its established education sector, positions it for significant future revenue growth. As AI continues to revolutionize the security industry, its innovative solutions and strong market position make it a compelling investment opportunity.
5. Beamr Imaging Ltd. (NASDAQ:BMR)
Average Upside Potential: 158.06%
Share Price as of November 5: $2.78
Number of Hedge Fund Holders: 1
Beamr Imaging Ltd. (NASDAQ:BMR) specializes in video encoding, transcoding, and optimization solutions. It provides a suite of software products designed to enhance video quality while reducing file sizes, which is crucial for streaming services and content distributors. Offerings include advanced video compression technologies like Beamr 4 and Beamr 5 encoders, as well as JPEGmini for photo optimization. These solutions are particularly beneficial for over-the-top platforms and Hollywood studios, helping them deliver high-quality video content efficiently.
Recently, the company has gained attention for its partnerships and innovations in the video optimization space, positioning itself as a key player in the evolving media landscape. Q2 2024 was marked by significant advancements in AI-powered video technology. In July, it launched its first AI capability integrated into Beamr Cloud, the company’s GPU-powered video service.
The company integrated AI features into its video services, enabling advanced search capabilities within videos and automated transcription in multiple languages. This shift towards AI-driven solutions not only addresses traditional challenges like storage and streaming but also revolutionizes the way videos are consumed and understood. By prioritizing AI-integrated developments, Beamr Cloud is accelerating video delivery and enhancing the overall user experience.
In H1 2024, revenues for Beamr Imaging Ltd. (NASDAQ:BMR) increased by 5% to $1 million year-over-year. The increase was driven by signing new license agreements offset by those terminated. This company is one of the most popular AI penny stocks to buy right now.
4. Nerdy Inc. (NYSE:NRDY)
Average Upside Potential: 257.57%
Share Price as of November 5: $0.90
Number of Hedge Fund Holders: 14
Nerdy Inc. (NYSE:NRDY) is an online education company that operates a platform for live learning, primarily through its flagship service, Varsity Tutors. It connects students of all ages with tutors and subject matter experts across a range of subjects using advanced technology, including AI. The platform offers various learning formats, such as one-on-one tutoring, small group classes, and adaptive self-study tools, aiming to provide personalized educational experiences.
The company reported mixed financial results for Q3 2024. While the company achieved revenue of $37.53 million, in line with expectations, a 6.86% year-over-year decline was recorded due to a decrease in average revenue per member (ARPM) to $893. This shift towards lower-frequency learning memberships suggests a focus on AI-powered personalized learning experiences that require less frequent interaction with human tutors.
Despite the revenue decline, Nerdy Inc. (NYSE:NRDY) made significant progress toward its key goals. The company invested in product enhancements to improve the quality and reliability of live learning, and expanded access to its Varsity Tutors for Schools platform, reaching 1.1 million students, bringing the total to 4.4 million. These efforts demonstrate its commitment to making high-dosage tutoring accessible through its AI-powered platform.
Looking ahead, the company remains optimistic about the growing demand for live, AI-powered tutoring. Its focus on high-dosage tutoring and its strong financial position with $65 million in cash on the balance sheet position it well to capitalize on this trend.
3. Rekor Systems Inc. (NASDAQ:REKR)
Average Upside Potential: 324.53%
Share Price as of November 5: $1.08
Number of Hedge Fund Holders: 9
Rekor Systems Inc. (NASDAQ:REKR) provides innovative infrastructure solutions for the transportation, public safety, and urban mobility sectors. It offers a suite of AI-powered platforms designed to enhance roadway intelligence and traffic management. Key products include Rekor One, an AI-powered roadway intelligence platform, and Rekor Command, a cloud-based platform for traffic management centers and first responders. It also provides automated vehicle recognition technologies, facilitating efficient traffic enforcement and management
The company was recognized by ITS America as a leader in AI for digital infrastructure and transportation. Rekor Command reduced secondary crashes by 29% and improved incident response times by 44 minutes in the second quarter of 2024. Overall growth at the company is supported by increased contracts, expanded services, and strategic financing.
It secured a $1.5 million contract with Maryland DOT to deploy Discover across major corridors. It has also expanded into Colorado’s Pitkin County and secured over $15 million in new contracts, expanding its reach to Ohio and Texas. These deals will use AI to improve traffic management and road planning. The company is rapidly growing in the Baltimore area and has recently been granted several new technology patents, highlighting its dedication to developing AI-powered insights.
Rekor Systems Inc.’s (NASDAQ:REKR) focus on AI-driven solutions, strategic partnerships, and expanding market reach positions the company for continued growth and success. It still faces liquidity challenges and relies on external financing, but analysts are optimistic about its future.
2. Datasea Inc. (NASDAQ:DTSS)
Average Upside Potential: 781.32%
Share Price as of November 5: $2.55
Number of Hedge Fund Holders: N/A
Datasea Inc. (NASDAQ:DTSS) focuses on providing innovative products and solutions in the fields of acoustics and 5G communication. It uses AI in its 5G multimodal communication services to enhance digital interactions across various sectors. It integrates AI with 5G technology to provide advanced solutions, including AI-driven digital marketing and smart agriculture, enabling real-time data analysis and personalized user experiences.
Its 5G AI business has advanced significantly, integrating various information formats with AI processing. This has led to the development of a comprehensive digital platform for multiple industries. Its 5G AI multimodal services, delivered by Shuhai Information and Guozhong Times, generated $9 million in September revenue from Qingdao Ruizhi Yixing. These agreements, valued at $30 million, are expected to significantly boost the company’s FY2025 revenue and strengthen its position in China’s 5G application market.
With a strong financial position and a promising pipeline of projects, the company is well-positioned to capitalize on the growing demand for 5G AI and acoustic solutions. Datasea Inc.’s (NASDAQ:DTSS) commitment to technological innovation, strategic partnerships, and customer focus will drive continued growth and success in the future.
1. iLearningEngines Inc. (NASDAQ:AILE)
Average Upside Potential: 1176.60%
Share Price as of November 5: $1.41
Number of Hedge Fund Holders: 8
iLearningEngines Inc. (NASDAQ:AILE) is an AI-powered learning automation company that specializes in providing solutions for enterprises to enhance their operational efficiency and knowledge management. Its platform enables organizations to deploy AI applications using a low-code approach, allowing them to automate learning processes and leverage institutional knowledge effectively.
It recently announced partnerships with GenLab Venture Studio and Exult Global. The GenLab partnership aims to accelerate GenAI application development, especially in regulated sectors like healthcare and education. The Exult Global collaboration, leveraging Microsoft Fabric and Azure, will streamline operations and expedite AI use case deployment.
The company collaborates with over 30 Value-Added Resellers (VARs), reaching over 1,000 end customers and over 4.7 million end users as of Q2. It is expanding to Europe, targeting insurers in 5 key markets: Denmark, Sweden, Switzerland, the Netherlands, and the UK. The company’s AI-powered solutions, including its Telematics Hyper-App and Knowledge Cloud, aim to accelerate AI adoption and drive digital transformation.
LearningEngines Inc. (NASDAQ:AILE) is making significant strides in the insurance industry by showcasing its AI-powered solutions at key industry events. By participating in ITC Vegas and the Insurance Innovators Summit, the company is demonstrating its commitment to leveraging AI to optimize insurance processes, improve operational efficiency, and drive innovation, making it one of the top AI stocks to consider right now.
As we acknowledge the growth potential of iLearningEngines Inc. (NASDAQ:AILE), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AILE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
