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.
7. Lantronix, Inc. (NASDAQ:LTRX)
Number of Hedge Fund Holders: 13
Lantronix, Inc. (NASDAQ:LTRX) is a tech company that specializes in Internet of Things (IoT) solutions and provides connectivity, compute, and software technologies to enable devices to connect and communicate securely. It’s like a bridge between these devices and the online world. It is used by businesses in manufacturing, automotive, retail, and financial services sectors.
In FQ2 2024, the company recorded $41.2 million in revenue, with a 25% year-over-year growth. The earnings per share were $0.11, also exceeding expectations by $0.01. IoT System Solutions revenue alone saw a 91% year-over-year increase.
Lantronix, Inc. (NASDAQ:LTRX) is expanding in the smart grid and automotive sectors through solutions for interactive displays and digital cockpits. It combines edge computing devices with its Percepxion IoT software to make user-friendly AI for businesses. Percepxion IoT software integrates AI with IoT technologies, allowing users to make decisions using real-time data in industries like defense and healthcare.
Recently, it signed an agreement with 180 Degree Capital, which included the nomination of directors, Derhacobian and Palatnik. The agreement is initially set to expire before the 2025 stockholder nomination deadline and will be extended only if certain conditions are met by then. Nonetheless, such strides by Lantronix, Inc. (NASDAQ:LTRX) make it one of the best AI stocks to buy right now.
13 hedge funds hold this company as of June 30, with First Eagle Investment Management being the highest shareholder, with a position of $3,036,081.
Wasatch Micro Cap Value Strategy stated the following regarding Lantronix, Inc. (NASDAQ:LTRX) in its first quarter 2024 investor letter:
“Another significant detractor was Lantronix, Inc. (NASDAQ:LTRX), which provides integrated software and application development, software as a service (SaaS) management, intelligent edge computing and a wide range of sensors and trackers. The stock moved higher early in the quarter based on expectations for strong revenues and earnings. But when the numbers were released later in the quarter, the stock plummeted because Lantronix failed to meet expectations. While we were disappointed along with other investors, we note that revenues and earnings did in fact increase—albeit modestly. Considering the attractive valuation currently, we’ve maintained our position in the company.”
6. Nerdy, Inc. (NYSE:NRDY)
Number of Hedge Fund Holders: 14
Nerdy, Inc. (NYSE:NRDY) is an online learning platform that connects students with expert tutors, whether they want to learn one-on-one, in groups, or through self-study. The company provides a virtual classroom with a mission to make learning easy and accessible through technology. In August, The founder, Charles Cohn bought $9.7 million worth of the company’s shares, increasing his ownership to 85%.
For Q2 2024, Nerdy, Inc. (NYSE:NRDY) reported revenue of $51 million, with a 4.39% year-over-year growth. The loss per share was $0.08. Management reported that 72% of the total revenue came from Consumer Learning Membership subscriptions. Number of customers also grew 12% year-over-year.
The company has a flagship platform under the name of Varsity Tutors, where students can access over 3,000 subjects. It merged all school institutional customers onto a single platform, providing a unified learning experience. During Q2, the institutional business segment of the company brought an additional 1.1 million students on board and enabled access to Varsity Tutors for about 600 school districts.
With instances of recent insider buying and its growing market share on the institution side, NRDY is a good AI stock under $50 to consider buying. The EdTech market is expected to grow at a compound annual growth rate of 13.4% from 2024 to 2030 (reported by Grand View Research) and we can expect Nerdy (NYSE:NRDY) to deliver higher returns in the upcoming years. The stock was held by 14 hedge funds at the close of Q2 2024.
5. SoundHound AI (NASDAQ:SOUN)
Number of Hedge Fund Holders: 15
SoundHound AI (NASDAQ:SOUN) is a voice AI and speech recognition company that is used by many companies in many different products like phones and cars, such as LG Electronics, Lenovo, Ford Motor Company, and Toyota Motor Corporation. It has cars in production in over 20 markets, with a new deal signed with a US-based EV maker, and an expansion of an existing EV manufacturer in Europe just recently.
In Q2 2024, the company recorded a revenue of $13.46 million, beating analyst expectations, with a 53.83% year-over-year growth. The loss per share was $0.11. The subscriptions/bookings backlog doubled year-over-year, and the annual run rate of queries is now over 5 billion, according to management.
SoundHound AI (NASDAQ:SOUN) just announced the acquisition of Amelia, a conversational AI leader, in Q2. This is a strategic extension to create a platform that exceeds human capabilities. With combined experience of decades, these companies can provide best-in-class customer service support to many businesses.
SoundHound AI (NASDAQ:SOUN) is the first company to roll out ChatGPT-style capabilities to in-vehicle voice assistants in Japan and Latin America. It partnered with Perplexity to bring cutting-edge online LLMs to SoundHound Chat AI, making it the most advanced voice assistant available on the market today. This advancement is expected to go live soon.
SoundHound AI (NASDAQ:SOUN) also acquired Allset to build a voice commerce ecosystem, expanding product offerings and its customer base. This rapid pace at which the company is growing through innovative voice AI technology strengthens its position in the market. Moreover, its winning market share and signing deal, after deal, after deal. All these factors combined make SOUN one of the best AI stocks to buy under $50.
4. Lemonade (NYSE:LMND)
Number of Hedge Fund Holders: 17
Lemonade (NYSE:LMND) is a digital insurance company that uses AI to streamline the insurance process, by offering a variety of insurance products in many countries for homeowners, renters, pets, and term life. The goal is to make insurance more accessible, affordable, and transparent.
The company generated a revenue of $122 million, up 16.63% year-over-year, in Q2 2024. The loss per share was $0.81. It exited the quarter with over 2 million customers.
Despite industry-wide elevated CAT (catastrophic events) losses, the company’s loss ratio improved to 79%. Management achieved this by focusing on products with lower CAT exposure (like pet and renters insurance), geographic diversification (by going to Europe), and strategic home insurance placement. It also announced a contribution of over $2 million to 43 nonprofits, marking its 8th consecutive year of giving back and reflecting its commitment to social impact.
The company is leveraging AI at every stage of the customer journey and internal operations to drive efficiency. Lemonade’s (NYSE:LMND) GenAI can handle 30% of customer-service interactions without human intervention. Management announced plans for auto expansion in the next 18 months. Such ventures make Lemonade (NYSE:LMND) one of the best AI stocks to buy.
As of June 30, 17 hedge funds are long LMND. D E Shaw is the biggest shareholder with a stake worth $16,328,137.
3. C3.ai Inc. (NYSE:AI)
Number of Hedge Fund Holders: 18
C3.ai Inc. (NYSE:AI) specializes in enterprise AI. It can be thought of as a company that builds toolkits to help businesses solve real-world problems by integrating AI into their operations. The company helps address problems like fraud detection in finance, predictive maintenance in manufacturing, and supply chain optimization.
In FQ4 2024, C3.ai Inc. (NYSE:AI) recorded $86.59 million in revenue, exhibiting a 19.58% year-over-year rise. The loss per share was $0.11, which was $0.19 lower than analysts’ estimates. The company expects revenue growth of 23% in fiscal year 2025.
C3.ai Inc. (NYSE:AI) has seen strong interest in its GenAI products, with over 50,000 inquiries in Q4. These products are deployed across 15 industries and offer features like safe, secure, and reliable information retrieval, deterministic responses, robust enterprise controls, and minimal hallucination risk.
It has supercharged its community with C3 GenAI co-pilot, increasing developer productivity. There is increased customer usage across different companies. Cargill expanded its use to 18 plants, Baker Hughes deployed it across 855 sites, and Petronas, and Dow also use it to enhance predictive maintenance and reduce downtime.
It has a first-mover advantage in the enterprise AI market and serves 90 such applications. Like some analysts, C3.ai Inc. (NYSE:AI) also believes that AI value will shift from hardware to software over time, and plans to benefit from this long-term structural change. With a clear moat in its industry and market share-winning executions, C3.ai is one of the best AI stocks to buy now according to hedge funds.
As of June 30, the stock is held by 18 hedge funds. The largest shareholder was Citadel Investment Group, with a position worth $85,964,864.
Bireme Capital stated the following regarding C3.ai, Inc. (NYSE:AI) in its fourth quarter 2023 investor letter:
“Our final new short position is in a company called C3.ai, Inc. (NYSE:AI). Originally named “C3 Energy,” C3.ai has changed its name multiple times based on whatever hot new trend they were supposedly capitalizing on. The “energy” theme was about smart grid and cap-and-trade. Then the firm changed its name to “C3 IoT” to attempt to capitalize on the Internet of Things buzz. After that trend fizzled out, the moniker was altered once more, with the company capturing the “AI” ticker in December 2020 – a savvy move if it wants to sell stock to credulous investors, but irrelevant to its business prospects. As Kerrisdale put it, the company is a “minor, cash burning consulting and services business masquerading as a software company.”
2. Evolv Technologies Holdings, Inc. (NASDAQ:EVLV)
Number of Hedge Fund Holders: 19
Evolv Technologies Holdings, Inc. (NASDAQ:EVLV) is a company that uses AI to develop safer and faster security technology. The devices it designs can be used for instances like scanning people for weapons, and other similar threats in places like airports, stadiums, and government buildings.
In Q2 2024, Evolv Technologies Holdings, Inc. (NASDAQ:EVLV) recorded $25.54 million in revenues, exceeding estimates by $1.70 million, with a 28.83% year-over-year growth. The earnings per share were $0.02, beating analyst expectations by $0.14.
The company added 84 new customers, bringing the total to a record high of 800 (since Q4 2022), across 10 key vertical markets. Further, there was a 60% sequential increase in the number of Evolv Express units sold to education customers.
The company’s products are deployed in 22 of the 100 largest school districts in the US and over 400 hospital buildings nationwide. More than 40 teams across 5 major professional sports leagues in the US rely on Evolv Technologies Holdings, Inc. (NASDAQ:EVLV).
The company expects to sell subscription-based products to both new and existing customers, increasing their lifetime value. The mission is to democratize security and make the world a safer place, and with this mission, Evolv Technologies Holdings, Inc. (NASDAQ:EVLV) is likely to achieve its financial goals, including 25% revenue growth in 2024. 19 hedge funds were long EVLV at the close of Q2 2024.
1. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 44
Palantir Technologies Inc. (NYSE:PLTR) is a software company, specializing in data analytics and AI. It provides software solutions to organizations so that they can conveniently visualize and analyze large datasets to make better data-driven decisions. The company works with both government agencies and commercial businesses and helps them make data-driven decisions.
In the second quarter of 2024, it generated a revenue of $678.13 million up 27.15% year-over-year. The earnings per share were $0.09, which was $0.01 higher than Street expectations.
US commercial revenue, excluding strategic contracts, climbed 70% year-over-year. A lot of this growth comes from existing customers signing expansion deals, in healthcare, energy, and finance. US government business grew over 8% for two consecutive quarters. This included a production contract from the Department of Defense to deploy an AI-enabled operating system, with an initial order of $153 million.
Management says that the company’s investments in infrastructure and oncology have positioned them as leaders in AI. As the GenAI market is projected to reach $1.3 trillion by 2032, Palantir Technologies Inc. (NYSE:PLTR) is a strong player and one of the best AI stocks to buy under $50. Both its businesses, government and commercial, are growing. The company is also winning market share in the US and global markets and is well-positioned to benefit from the ongoing digital transformation of both businesses and government departments.
The stock was held by 44 hedge funds at the close of Q2 2024. The largest shareholder is Renaissance Technologies, with a position worth $1,000,922,777.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
While we acknowledge the growth potential of Palantir Technologies Inc. (NYSE:PLTR), 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 PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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