In this article, we’re going to talk about the 10 best artificial intelligence stocks under $50 according to hedge funds.
An Overview of the AI Industry
Artificial intelligence is the hottest topic right now. A significant development in the AI industry is California’s recent proposal of the AI regulation bill, SB 1047, introduced by State Senator Scott Wiener, which aims to establish strict safety protocols for advanced AI systems (those costing over $100 million to develop). The bill requires AI systems costing over $100 million to develop a ‘kill switch’ to deactivate models that malfunction, hire third-party auditors to evaluate safety practices, and empower the California Attorney General to sue developers for non-compliance.
Major tech companies have opposed it, citing concerns that it could stifle innovation and drive talent away from California. Some lawmakers, including prominent Democrats like Nancy Pelosi, agree on the potential negative impacts on AI development and open-source models. Despite these objections, the bill has passed the state Senate and is awaiting a vote in the Assembly. If passed, the bill will be sent to Governor Gavin Newsom for approval or veto by the end of September.
Despite such controversial developments, the AI market seems to flourish today. As of 2023, the global AI industry was valued at $196.63 billion, according to Grand View Research. We recently covered the AI industry’s growth potential in our article on the 7 Most Popular AI Penny Stocks Under $5, here’s an excerpt from that:
“PwC reported that the global AI market could contribute $15.7 trillion to the global economy by 2030, surpassing the combined output of China and India. It will also be responsible for a 26% boost in local GDPs. 45% of total GDP gains by this period will come from AI consumption. It will drive economic benefits through efficiency improvements for enhanced productivity, automated routine tasks, and higher-value work. Goldman Sachs reported that the average increase in productivity with the use of AI is 25%.”
According to Jefferies’ Analyst, Brent Thill, the remaining 2 quarters of 2024 will see a rotation of investments from AI infrastructure to AI software. Infrastructure typically refers to the hardware and foundational technologies that support AI applications, whereas software includes those applications and platforms that utilize AI technologies. As this shift occurs, investors are expected to reallocate towards software industries.
While companies continue investing in AI, Stanley Druckenmiller, the chairman and CEO of Duquesne Family Office, recently cut his stake in Wall Street’s favorite GPU maker despite being bullish on AI. He believes that AI is overly hyped in the current period, but this is not short of the fact that it will be under-hyped long term.
However, according to Kunal Kapoor, the CEO of Morningstar, the US market is fairly valued, with some segments possibly overvalued. It’s important to focus on long-term investment strategies rather than reacting to short-term market fluctuations. Time in the market is more important than timing the market.
Kapoor said that AI has significantly influenced market returns over the past decade. AI-driven stocks have contributed to robust returns, with an average of 12% in that period, but will likely deliver more moderate returns (about 5% to 7% annually) in the next decade.
Wedbush’s analyst Dan Ives believes that NASDAQ will have a strong second half for the year, and tech stocks will be up 15%, driven by developments in AI. In this context, the AI industry offers diverse investment opportunities for people with different risk tolerances. So, we’re here with a list of the 10 best artificial intelligence stocks under $50 according to hedge funds.
10 Best Artificial Intelligence Stocks Under $50 According to Hedge Funds
Methodology
To compile our list, we sifted through ETFs, online rankings, and internet lists to find the top 15 AI stocks under $50. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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 Artificial Intelligence Stocks Under $50 According to Hedge Funds
10. Rekor Systems (NASDAQ:REKR)
Number of Hedge Fund Holders: 9
Rekor Systems (NASDAQ:REKR) provides AI-powered infrastructure solutions for transportation, public safety, and urban mobility markets. It uses AI to analyze data from different sensors, like cameras, to improve traffic management, and response timings.
In Q2 2024, the company recorded a revenue of $12.43 million, exceeding expectations, and exhibiting 45.12% year-over-year growth. The growth was also 27% more than Q1. While the loss per share was $0.12.
Rekor Command, a traffic management software platform, reduced secondary crashes by 29% and improved incident resolution times by 44 minutes. Intelligent Transportation Systems (ITS) Americas recognized Rekor Systems (NASDAQ:REKR) as a leader in AI for digital infrastructure and transportation.
Management sees growth potential in the transportation infrastructure industry, with an estimated $200-$300 million in cash flows over the next few years. It announced the deployment of up to 1,000 Discover and Edge units in one of the largest US states, with a potential estimated revenue of $35 million.
Rekor Systems (NASDAQ:REKR) has secured a $1.5 million contract with the Maryland Department of Transportation to deploy Discover across major corridors. It also expanded into Colorado’s Pitkin County. This platform has been awarded over $15 million in new contracts, expanding its reach to Ohio and Texas. Rekor Command also expanded to Oklahoma, Kansas, and Oregon.
It’s one of the fastest-growing companies in the Baltimore region, and received multiple new technology patents recently, demonstrating its commitment to advancing AI-driven insights. Despite the relatively short time of technology deployment in the market, Rekor Systems (NASDAQ:REKR) is one of the best AI stocks under $50. It is currently held by 9 hedge funds, as of Q2 2024.
9. BigBear.ai Holdings, Inc. (NYSE:BBAI)
Number of Hedge Fund Holders: 9
BigBear.ai Holdings, Inc. (NYSE:BBAI) utilizes AI solutions and provides software to make data-driven decisions across various industries, like national security, supply chain management, and digital identity. This is a leading technology company that specializes in Vision AI, a type that uses computer vision to analyze visual data, like images and videos, and extract insights.
The company wants to help customers conveniently gain the ability to adopt Al-powered solutions in an edge network setting. What this means is that consumers will be able to deploy AI capabilities closer to where data is generated, like IoT devices, rather than a centralized cloud. This will improve response times greatly, but the availability of such a platform will be in 2025.
The second quarter for BigBear.ai Holdings, Inc. (NYSE:BBAI) looked good as it partnered with Heathrow Airport to develop advanced technologies to improve security, operations, and the overall passenger experience. Heathrow is the UK’s largest airport, serving over 200,000 passengers daily.
It also acquired a new $7.7 million, 7-month contract with the US Army, and an $8.5 million, 6-month extension to continue another project, solidifying the company’s role as a prime contractor for the US Army.
The company is expected to thrive as AI penetrates the defense space and is still early in its growth story. The stock is one of the best AI stocks under $50 to buy right now. BBAI was held by 9 hedge funds at the close of Q2 2024.
8. Perfect Corp. (NYSE:PERF)
Number of Hedge Fund Holders: 9
Perfect Corp. (NYSE:PERF) is an AI-powered beauty and fashion tech company, revolutionizing how consumers shop online. It uses cloud-based artificial intelligence and augmented reality to help people try on makeup, jewelry, and clothes virtually, without having to go in-store. This interactive technology is a game-changer in the fashion industry and is employed by big names like MAC Cosmetics, NARS, Forever 21, and H&M.
Towards the end of Q2, Perfect Corp. (NYSE:PERF) announced that their CEO, Alice H. Chang, increased her ownership stake in the company by purchasing 597,256 Class A ordinary shares at an average price of $2.36 per share, bringing her total ownership to about 17.1% of the company.
In the second quarter of 2024, the company generated $13.91 million in revenue, exhibiting 9.60% year-over-year growth. The earnings per share for the quarter were $0.01.
Management reported that of the total revenue, subscription revenue contributed 92.8%. In Q2, there was an 18.3% year-over-year increase in active subscribers. By the end of June, the company had 686 brand clients, 20 of which were added in the first half of 2024.
AI and AR are revolutionizing the beauty and fashion industry, with personalized experiences, and improved virtual try-ons. High customer satisfaction and plans for advancements make Perfect Corp. (NYSE:PERF) stock one of the best AI stocks to buy now. It’s held by 9 hedge funds.