In this article, we’re going to talk about the 10 worst small-cap AI stocks to buy according to short sellers to short sellers.
The September Interest Rate Cut
Analysts have been anticipating interest rate cuts for a while now, with bets on either a 25- or a 50-basis point reduction. Concerns about potential economic instability and the impact of these cuts on net interest income for banks added complexity to the market outlook. However, the situation was sorted when the Fed cut interest rates by 50 basis points on September 18 this week, marking its first easing of monetary policy since the pandemic began.
This reduction was prompted by growing concerns about the labor market’s health. Following this decision, the Fed’s benchmark rate now stands at a range of 4.75% to 5.0%.
The Fed’s Summary of Economic Projections indicates that policymakers anticipate further cuts, with expectations of a half-point reduction by the end of this year, an additional full percentage point in 2025, and another half-point cut in 2026, ultimately targeting a range of 2.75% to 3.00%. Fed Chairman Jerome Powell stated that the projected rate cuts are not urgent and that the timing for easing is appropriate.
As political dynamics unfold ahead of the presidential elections in November, Powell emphasized that monetary policy decisions are based solely on data and economic outlooks rather than political considerations.
While a lot of analysts suggested that a 50 basis-point rate cut could be an over-exaggeration, Erika Najarian, UBS senior equity research analyst, just earlier this week, mentioned that small- and mid-cap stocks could benefit from a 50 basis-point cut. We talked about this in another one of our articles, 16 Best Mid Cap Growth Stocks To Buy Now, here’s an excerpt from it:
“Najarian attributes the recent underperformance of financial stocks to market concerns about the implications of potential rate cuts for economic stability, leading investors to question a less favorable economic outlook. She believes some anticipated cuts may already be reflected in money center bank stock prices due to their strong year-to-date performance. A 50 basis point cut could especially benefit mid-cap stocks affected by commercial real estate issues.
She explains that a 50 basis point cut would significantly impact net interest income. Money center banks benefit more from rising rates, while mid-caps are liability-sensitive and may see deposits repriced faster, favoring them if rates are cut aggressively…. She points out that banks must choose between cutting rates to remain competitive or maintaining volume, complicating forecasts for net interest income.”
Right after the Fed’s announcement, Mark Avallone, president at Potomac Wealth Advisors, discussed his reaction to the Fed’s 50 basis-point rate cut, considering the recent financial market fluctuations sparked by this decision. The move led to a volatile trading session, with the Dow Jones Industrial Average initially reaching all-time highs before briefly turning negative. By the end of the session, the Dow was up 188 points, while the S&P 500 rose by half a percent and the NASDAQ climbed approximately 0.8%.
Mark Avallone expressed surprise at the Fed’s decision but emphasized that investors shouldn’t make impulsive decisions, but rather utilize potential opportunities in small and mid-cap stocks, which he believes will benefit from a lower interest rate environment. He noted that these stocks are currently valued at about 50% of the forward price-to-earnings ratio compared to large-cap stocks, making them an attractive investment option.
Avallone warned investors to be cautious with traditional banks, especially mid-sized and large ones, based on his experience at Bank of America. He believes that the recent changes in loan pricing after the Fed’s rate cut would hurt banks’ overall revenue and income from interest. Since deposit rates are likely to stay high due to competition from non-bank financial companies and money market funds offering attractive rates above 5%, traditional banks might find it hard to stay profitable.
He suggested that it may be too late for significant moves in fixed-income investments, as many investors have already lengthened their bond durations. He recommended pausing further adjustments until it’s clear whether the rate cut is due to an economic slowdown or a preemptive action.
So, while the Fed’s interest rate cut has created uncertainty in the markets, Avallone’s analysis highlights specific sectors and strategies that could offer potential growth amid these challenges. With that context, we’re bringing you a list of the 10 worst small-cap AI stocks to buy according to short sellers to short sellers.
Methodology
We used stock screeners to look for AI companies trading between $1 billion and $10 billion, that’s our definition of small-cap stocks. We then selected 10 stocks that were shorted but at the same time popular among elite hedge funds and that analysts were bullish on. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers. The stocks are ranked in ascending order of their short interest.
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 Worst Small Cap AI Stocks To Buy According to Short Sellers
10. Ambarella Inc. (NASDAQ:AMBA)
Short % of Shares Outstanding As of August 30: 3.64%
Market Capitalization as of September 14: $2.22 billion
Number of Hedge Fund Holders: 29
Ambarella Inc. (NASDAQ:AMBA) is an edge AI semiconductor company that specializes in high-performance, low-power video processing solutions. Its chips are used in action cameras, drones, security cameras, and automotive systems, and are designed to enable AI applications to be executed at the edge of a network, rather than in a centralized cloud data center.
In FQ2 2025, revenue for Ambarella Inc. (NASDAQ:AMBA) was $63.72 million, up 2.58% year-over-year, and 17% sequentially. The loss per share came out at $0.13.
Auto revenue grew slightly sequentially with stronger growth in IoT, representing ~70% of the total revenue. The company also achieved record edge-AI inference revenue. Two logistics companies, WT Microelectronics and Hakuto, accounted for ~10% of FQ2 revenue. WT Microelectronics represented 63% of revenue, while Hakuto contributed 10%.
The company’s new 5-nanometer products, including the CV5, CV7, and CV3-AD families (featuring advanced AI capabilities), are driving strong initial revenue growth in IoT and automotive. CV2 products, used for computer vision applications, are primarily driving AI revenue. The CV7 family will enter production in late fiscal 2025.
It’s pursuing OEMs and Tier 1 customers for its CV3-AD family, targeting L2+ and higher autonomy levels. Production is expected to begin in 2026/fiscal 2027. The company is also developing new products like N1, 4D radar, and autonomous driving software.
Despite industry challenges, like the ongoing shakeout in EV OEMs and mixed enterprise and consumer IoT spending, the company has achieved strong results and maintains a positive outlook, due to its strategic focus on monetizing increasing demand for AI-powered solutions, including AI inference and edge computing. Management expects the fiscal year 2025 revenue to grow by a mid- to high-teen percentage compared to the previous year.
Meridian Contrarian Fund made the following comment about Ambarella, Inc. (NASDAQ:AMBA) in its Q3 2023 investor letter:
“Ambarella, Inc. (NASDAQ:AMBA) designs system-on-a-chip semiconductor solutions that specialize in visual processing for the security, industrial, and automotive markets. We have owned Ambarella since the third quarter of 2017 when earnings declined due to sales shortfalls at large customer GoPro. Our thesis was that emerging artificial intelligence (AI), automotive, industrial, and security markets would soon dwarf the company’s declining consumer market. After significant outperformance in 2021driven by strong demand for AI-enabled computer vision chips in a variety of applications, Ambarella’s stock has been weak since2022 and was again this quarter. Ambarella’s legacy products, mainly image processors for low-end security cameras, are in decline while the company re-focuses its resources on its computer vision chips, which are enabled for AI processing. The company has a core competency in placing very complicated algorithms on individual chips in a very power-efficient way, placing Ambarella in a strong leadership position as AI capabilities shift from centralized data centers to inference at the edge, a fast-growing future market. We also believe that the company’s superior technology makes it a highly attractive acquisition target for many larger technology companies. As such, the stock remains in the portfolio, though we reduced the position during the quarter as we believe an earnings growth catalyst may be several quarters in the future.”
9. AeroVironment Inc. (NASDAQ:AVAV)
Short % of Shares Outstanding As of August 30: 4.56%
Market Capitalization as of September 14: $4.92 billion
Number of Hedge Fund Holders: 24
AeroVironment Inc. (NASDAQ:AVAV) is an American defense contractor that designs and manufactures unmanned aerial vehicles (UAVs) and robotic systems, harnessing advanced AI to enhance operational efficiency. For instance, its drones incorporate advanced AI capabilities for autonomous navigation, image and video analysis, and data processing.
In late August, it secured a $1 billion US Army 5-year sole-source IDIQ contract for the Switchblade 600 drones. The US government also approved the company to sell Switchblade 300 drones to Taiwan. It recently received a $128 million contract for its drones, which is part of the larger $1 billion contract.
AeroVironment Inc. (NASDAQ:AVAV) was able to set a new first-quarter revenue record this time, generating $189.48 million in FQ1 2025, recording a 24.38% year-over-year increase.
The Loitering Munition Systems (LMS) business made a revenue of ~$52 million in FQ1, up 68% year-over-year. The Uncrewed Systems segment made $120 million, up 22%. Demand for Switchblade 300 and 600 remains high.
The Uncrewed Systems segment remains a top revenue driver, led by Puma and JUMP 20 platforms. The new P550 platform, designed for long-range reconnaissance (LRR), is gaining traction. The company is optimistic about its potential, especially after submitting it for the US Army’s LRR program. The MacCready Works segment is also advancing AI and autonomous capabilities.
The company’s positive outlook is fueled by strong demand for its UAVs and tactical missile systems, such as the Puma, Raven, and Switchblade models, which are essential for modern defense. Its continuing focus on innovation, production, and customer service helps it stay ahead in this fast-growing market. As defense budgets increase worldwide, AeroVironment Inc. (NASDAQ:AVAV) is well-positioned for long-term growth.
8. UiPath Inc. (NYSE:PATH)
Short % of Shares Outstanding As of August 30: 5.03%
Market Capitalization as of September 14: $6.76 billion
Number of Hedge Fund Holders: 29
UiPath Inc. (NYSE:PATH) provides AI-powered and robotic process automation (RPA) software. RPA technology, together with AI capabilities, automates repetitive, rule-based tasks, making it a valuable tool for organizations seeking to optimize their workflows.
Usually, automation software like RPA faces competition from AI-based tools, as these tools can do similar things without needing much programming. However, UiPath Inc. (NYSE:PATH) uses AI to make its automation software even better, leveraging AI to understand and manage tasks, documents, and communications.
For instance, a Central American financial institution used its automation to reduce transaction clarifications from 8 days to 1 and shift over 50% of customers online. They also used it to onboard 500,000 new clients per year and are now piloting IDP for unstructured documents using generative classification, extraction, and validation capabilities.
Revenue for the second quarter of fiscal year 2025 was $316.25 million, beating Street estimates by 12.51 million, exhibiting a growth of 10.07% year-over-year. The quarter ended with an ARR of $1.551 billion, up 19%, driven by a net new era of $43 million.
The company now has ~10,810 customers, including some new ones like IXM, Veness, Masson Associates, and Piedmont Healthcare. It has 2,163 customers spending $100,000+ and 293 spending $1 million+.
The company’s success depends on serving its customers and focusing on ensuring successful implementation, improving communication, and aligning teams with customer needs. It recently launched new Genii-powered features, including specialized LLMs for IDP and GenAI activities, and Autopilot for developers and testers. All of these expansion strategies position the company for long-term growth.
7. Verint Systems Inc. (NASDAQ:VRNT)
Short % of Shares Outstanding As of August 30: 6.98%
Market Capitalization as of September 14: $1.62 billion
Number of Hedge Fund Holders: 23
Verint Systems Inc. (NASDAQ:VRNT) is a technology company that sells products and services for customer experience automation and utilizes AI technology to enhance its offerings in areas like analytics, workforce optimization, and security.
Management at Verint Systems Inc. (NASDAQ:VRNT) believes that there’s a big opportunity to use AI in contact centers. Companies spend a lot on customer service, and they want AI bots that can help them make money, so this company offers a unique platform that can do this.
The company made $210.17 million in revenue in FQ2 2025, a decline of 0.11% from the same quarter the prior fiscal year. This revenue was also $2.26 million less than analyst expectations but was able to give an earnings per share value of $0.49.
The revenue mainly came from new AI bookings, which increased over 40% in FQ2 year-over-year. Bundled SaaS revenue driven by AI was up 15% year-over-year.
The company’s competitive advantage is its ability to quickly deliver AI solutions to large brands. It launched an Open Platform with 40 AI bots a year ago. Many customers are now seeing positive results and increasing their use of these bots. Over half of the largest customers (those generating at least $1 million ARR) have purchased at least 1 AI bot.
The company’s AI-powered solutions are demonstrating strong traction in the market, with customers achieving significant business outcomes, including increased agent capacity, fraud prevention, cost savings, and improved customer satisfaction. Verint Systems Inc.’s (NASDAQ:VRNT) ability to deliver tangible results positions it well for continued success in the contact center market.
Here is what Bernzott Capital has to say about Verint Systems Inc. in its Q2 2021 investor letter:
“Verint Systems (VRNT): Initiated in January 2014, we exited with an absolute and relative gain. The company is progressing in its business model transition to subscription-based sales, and took a step toward shareholder value enhancement with its spin-off of Cognyte Software earlier this year. We sold those shares in 1Q. As the share price approached fair value, we sold VRNT which also reduced the portfolio’s exposure to the Software sector, where we remain overweight.”
6. Synaptics Inc. (NASDAQ:SYNA)
Short % of Shares Outstanding As of August 30: 7.42%
Market Capitalization as of September 14: $2.98 billion
Number of Hedge Fund Holders: 20
Synaptics Inc. (NASDAQ:SYNA) is a technology company that specializes in human interface solutions, such as touchpads and touchscreens. It recently made a strategic shift towards edge AI, focusing on perceptive intelligence. AI-powered solutions enable devices to understand and respond to user interactions more intelligently.
Revenue for the company was $247.40 million in FQ4 2024, up 8.84% from FQ4 2023. This was slightly above the midpoint of the company’s guidance range with enterprise products incrementally above forecast.
Core IoT products are growing, led by wireless, growing 63% year-over-year. Synaptics Inc. (NASDAQ:SYNA) also recently developed a new device that is 50% more energy-efficient and 40% smaller than similar high-performance products. Operator solutions continue to generate revenue, with recent wins in Japan. Enterprise and automotive products grew 7% sequentially, driven by video interface and PC products.
The company gaining market share in PCs and seeing increased demand for AI-based devices. In mobile, it’s aligned with the high end of the Android market. It is also excited about its core IRT opportunity, particularly in processors and wireless. At the same time, automotive market softness is slowing new technology adoption.
Its new chip will be sampled soon, with revenue starting in mid-2025. The Wi-Fi 7 device is ahead of schedule. The Astra line of embedded AI processors is getting attention. Initial demand for Makina RDKs has been strong. The company has made its software widely available and is building partnerships to scale faster. It has also started sampling its SR series of smart MCUs for vision-based applications.
Synaptics Inc.’s (NASDAQ:SYNA) strong focus on innovation and expansion, coupled with growing demand for AI-powered solutions and emerging technologies, positions it well for continued success and growth.
TimesSquare Capital U.S. Small/Mid Cap Growth Strategy stated the following regarding Synaptics Incorporated (NASDAQ:SYNA) in its fourth quarter 2023 investor letter:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, and systems that improve productivity or efficiency for their clients. A rebound in the PC and smartphone markets benefited Synaptics Incorporated (NASDAQ:SYNA), the developer of human interface technologies for a variety of devices. Synaptics’ revenues and earnings surpassed expectations thanks to that stabilization, and its management expects a further recovery in 2024. The company also won several new design mandates. That gave its shares a 28% lift.”
5. Lattice Semiconductor Corp. (NASDAQ:LSCC)
Short % of Shares Outstanding As of August 30: 8.83%
Market Capitalization as of September 14: $7.17 billion
Number of Hedge Fund Holders: 28
Lattice Semiconductor Corp. (NASDAQ:LSCC) is a semiconductor company specializing in the design and manufacturing of low-power field-programmable gate arrays that can be customized for various applications. It incorporates AI capabilities into its products, enabling smarter and more responsive devices in fields like machine learning, edge computing, and IoT.
The company had a slightly rough second quarter in 2024, with a 34.72% year-over-year decline in revenue, which came out at $124.08 million. This was $6.10 million lower than Street estimates. The earnings per share was still $0.23.
Despite strong demand, the company continued to under-ship products in Q2 due to inventory normalization. Industrial and automotive markets remained weak, with revenue down 23% sequentially. In communications and computing, revenue remained flat, with strength in data centers offsetting weakness in wireless. Management anticipates inventory normalization to continue through the second half of 2024.
Its small FPGA portfolio’s 7 to 5 family is ramping in Q3. Lattice Semiconductor Corp. (NASDAQ:LSCC) recently launched MachXO5D-NX and the latest Sentry solution stack, extending its leadership in security-focused hardware and software. It also launched Certus-NX-28 and Certus-NX-09, offering class-leading power efficiency, small size, and reliability.
In the mid-range FPGA portfolio, it launched 3 Avant devices. Avant-E achieved initial revenue last December and is expected to ramp throughout this year. The company aims for Avant-E and NX to achieve initial revenues before the end of this year. 90% of Avant customers are already Lattice customers. The Avant product line is generally strong, expanding TAM and driving long-term revenue growth.
The company’s hardware and software solutions are used in various AI applications, including data center servers, edge AI, and sensor data aggregation. It recently launched a Lattice NVIDIA Edge AI solution. Differentiated solutions position Lattice Semiconductor Corp. (NASDAQ:LSCC) for long-term growth.
Carillon Eagle Small Cap Growth Fund stated the following regarding Lattice Semiconductor Corporation (NASDAQ:LSCC) in its Q2 2024 investor letter:
“Lattice Semiconductor Corporation (NASDAQ:LSCC) provides chips used in various end markets. Investors have been disappointed this year as growth has slowed from last year’s much more robust pace. Furthermore, a surprising departure of the well-regarded CEO added to the shares pulling back. We believe the company is very well positioned to gain market share with its current line of products as well as new announcements that should help the company grow well above market rates for the next couple of years. The announcement of a permanent CEO from a well-regarded company also could alleviate concerns about the company’s management.”
4. Procept Biorobotics Corp. (NASDAQ:PRCT)
Short % of Shares Outstanding As of August 30: 11.59%
Market Capitalization as of September 14: $4.31 billion
Number of Hedge Fund Holders: 21
Procept Biorobotics Corp. (NASDAQ:PRCT) develops, manufactures, and sells the AquaBeam Robotic System, an advanced, image-guided, surgical robotic system for minimally invasive urologic surgery, initially focused on treating benign prostatic hyperplasia. Its robotic platform utilizes advanced AI algorithms to enhance precision, minimize tissue damage, and improve surgical outcomes.
Revenue growth in Q2 2024 was driven by strong US system sales, increased utilization of existing systems, and record international revenues. The company ended this quarter with 400 US systems installed, a 72% increase year-over-year. The US monthly utilization grew by 15%. Overall, Q2 ended with a 61.17% revenue improvement year-over-year.
Despite recent challenges, the market for hospital capital investments is improving. Procept Biorobotics Corp. (NASDAQ:PRCT) is talking to hospital CFOs, who are now more open to investing in its robotic system. Growing patient demand and motivated urologists drive hospitals to prioritize this technology to remain competitive. The company’s disruptive technology can help hospitals build strong BPH practices without relying on specialists.
The prostate cancer expansion gained attention at the AUA (American Urological Association), with growing interest in Aquablation therapy. The company is enrolling patients in PRCT002, its first IDE study for prostate cancer. It has received positive coverage policies from Blue Cross Blue Shield of Arkansas and Louisiana, covering roughly 1.5 million lives.
Additionally, procedure growth is driven by new surgeons performing procedures and high surgeon retention rates (exceeding 90%). This allows the company’s team to focus on training new surgeons. The company’s strategic initiatives, including new product development, partnerships, and market expansion, are expected to strengthen its market position.
NCG Small Cap Strategy stated the following regarding PROCEPT BioRobotics Corporation (NASDAQ:PRCT) in its Q2 2024 investor letter:
“PROCEPT BioRobotics Corporation (NASDAQ:PRCT) is a medical device company that has developed and is on the market with a robotic therapy for the treatment of BPH (benign prostatic hyperplasia). We believe PRCT has significant growth opportunity by not only taking share in the existing BPH market but by expanding the number of BPH patients treated each year and expanding into new indications, such as prostate cancer treatment, over time.”
3. SoundHound AI Inc. (NASDAQ:SOUN)
Short % of Shares Outstanding As of August 30: 22.29%
Market Capitalization as of September 14: $1.74 billion
Number of Hedge Fund Holders: 15
SoundHound AI Inc. (NASDAQ:SOUN) is a leading voice AI company specializing in natural language understanding (NLU). Its technology enables voice-enabled interactions with devices and services and is used by major automakers and consumer electronics companies in over 20 markets.
The company acquired Allset in June, and then Amelia AI later in August for $80 million in Q2 2024. Allset is an ordering platform, and Amelia offers customizable conversational AI solutions. These acquisitions aim to create a comprehensive platform beyond human capabilities and build a voice commerce ecosystem.
SoundHound AI Inc.’s (NASDAQ:SOUN) revenue is projected to reach $150 million in 2025, with $45 million from Amelia. Just recently, its Amelia Patient Engagement solution was employed by MUSC Health to improve patient access. The AI agent, named Emily, is powered by Amelia’s technology and helps patients manage appointments and get answers to non-clinical questions.
As of Q2 2024, the company had $13.46 million in revenue, up 53.83% year-over-year. It has a strong history of 50% revenue growth per year since 2021. The subscriptions and bookings backlog doubled year-over-year to $723 million, and annual query volume exceeded 5 billion.
This became the first company to offer ChatGPT-like features in in-vehicle voice assistants in Japan and Latin America. By partnering with Perplexity, they’ve added advanced online language models to its SoundHound Chat AI, which will be available soon. As automakers are willing to pay more for this upgrade, management expects higher revenue per unit.
It has also launched new customization tools for automotive brands to enhance their in-vehicle voice assistants, including Brand ID and Onboarding & Education. Customization services will be available to automakers in a SaaS model.
Despite being in its growth phase, the company’s advanced AI technology is resonating with customers, making it a strong candidate in the AI market.
2. C3.ai Inc. (NYSE:AI)
Short % of Shares Outstanding As of August 30: 22.31%
Market Capitalization as of September 14: $2.96 billion
Number of Hedge Fund Holders: 18
C3.ai Inc. (NYSE:AI) is an enterprise AI company that provides software and services to help businesses solve real-world problems by integrating AI into their operations. Offerings include a comprehensive AI suite, pre-built AI applications, and consulting services, empowering businesses to increase efficiency, reduce costs, improve decision-making, and gain a competitive edge through AI-driven solutions.
The company started the first quarter of fiscal 2025 with a revenue of $87.21 million, recording a 20.52% improvement from FQ1 2024, exceeding all expectations. The loss per share was $0.05, lower than $0.11 in the previous quarter. Subscription revenue alone was $73.5 million, up 20% from a year ago.
The fiscal first quarter ended with 71 closed agreements, including 72 new pilots marking a 117% year-over-year increase in the pilot count. C3.ai Inc. (NYSE:AI) also signed new agreements with GSK, Eletrobras, Valero, Swift, SmithRx, Sanofi, government agencies, and others. It expanded its footprint in state and local government, signing 25 agreements in various states.
It formed 51 new partnerships this quarter, with 72% of agreements closed through the partner ecosystem. The partner-supported bookings grew 94% year-over-year. It closed 40 agreements with Google Cloud, a 300% increase.
C3.ai Inc. (NYSE:AI) has a first-mover advantage in the enterprise AI market. As AI value seems to be shifting from hardware to software, this company’s long-term growth prospects improve. Analysts and hedge funds consider it a leading AI stock due to its strong market position and successful execution.
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.”
1. Lemonade Inc. (NYSE:LMND)
Short % of Shares Outstanding As of August 30: 23.83%
Market Capitalization as of September 14: $1.29 billion
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, to make insurance more accessible, affordable, and transparent. It has over 2 million customers.
In the second quarter of this year, the company made $122 million in revenue, up 16.63% year-over-year. In-force premium grew 22% to $839 million, while customer count increased by 14% to 2.2 million. Premium per customer increased 8% as compared to last year to $387, driven primarily by rate increases.
Despite increased catastrophic event losses, the company’s loss ratio improved to 79%. Lemonade (NYSE:LMND) achieved this by focusing on lower-risk products like pet and renters insurance, expanding to Europe, and strategically placing home insurance. It has launched homeowners insurance in the UK and France and continues to sell in the US where its AI predicts favorable long-term value. It’s also placing some home premiums with third parties in certain regions.
The company is investing heavily in AI-powered automation to streamline operations and improve profitability. It aims to optimize over 100 business processes, with early cost savings expected within 18 months. Its GenAI can handle 30% of customer interactions without human intervention. Lemonade (NYSE:LMND) is planning to expand into auto insurance within the next 18 months as well.
It’s using AI throughout its operations, from customer service to internal processes. The company plans to capitalize on the growing demand for digital, personalized insurance products through AI and is expected to position itself as a leader in the sector.
As we acknowledge the growth potential of Lemonade Inc. (NYSE:LMND), 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 NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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