11 Best Small Cap AI Stocks To Buy Now

Published on March 24, 2024 at 10:59 am by Fatima Farooq in Hedge Funds, News

In this article, we will be taking a look at the 11 best small cap AI stocks to buy now. To skip our detailed analysis of the AI sector, you can go directly to see the 5 Best Small Cap AI Stocks To Buy Now.

AI: A Consequential Technology

Artificial intelligence has taken the world by storm. AI has become one of the most exciting things to come out of the technology sector. As a result, some of the best AI stocks like NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), among others, are working the hardest to contribute to the AI race and maybe even lead it, have been attracting even larger amounts of investor attention. This is unsurprising, considering the immense growth AI has been undergoing. On February 14, George Lee, the co-head of the Goldman Sachs Office of Applied Innovation, discussed the growth potential of artificial intelligence, particularly with regard to geopolitics, and how geopolitics, in turn, may shape an AI-enabled future, on CNBC’s “Capital Connection.” Here are some of his comments:

“For me, where I specialize is really this intersection of generative AI and geopolitics. The rise of this new capability in the world is super consequential for countries and for regions, matters of economics, defense, and even culture itself, as Jensen Huang talked about the other day.”

On being asked how he expects machine intelligence to impact global growth, productivity, and the US-China conflict, Lee made the following comments:

“Well, our economists have called for a very significant impact, over a 10-year period, some 1.5% increase in global GDP as a result of this [AI]. Now, I think the important thing to reflect on that is that it’s a 10 year interval. While this has arrived abruptly, it’s hugely consequential and fascinating, it will take time for this to deepen its impact across economies around the world. And so, we’re very focused on trying to monitor that, and I think, my personal view is that there is going to be remarkable productivity and economic gains emerging from this. There’s also going to be an incredible leap in human creativity and productivity as we partner with machines just to address and solve challenges that have been prohibitively difficult in the past.”

According to Lee, humanity will likely evolve with machines and artificial intelligence, resulting in exceptional growth moving forward. He noted the following:

“In a sense, I think we will co-evolve with these machines, and look, we are very early days in this new generative AI revolution, but the pace of improvement, the trajectory of improvement, is so remarkable, that I think we do have to think pretty broadly about how we’re going to co-exist with machines, how we’re going to cooperate, and how, together, we can elevate humanity.”

Global Leaders in the AI Space

With the discussion on AI rapidly gaining speed and importance across the globe, many are beginning to wonder which global players will lead the way in this new global world order that is so heavily impacted by technology and artificial intelligence in particular. Lee gave his opinion on the matter of global leaders in the AI race as well. Here’s what he had to say:

“The US and China have an early lead in this. Like other technology revolutions, such as the internet, a lot of this sprang from the US, both academic and commercial roots. China is somewhat challenged in this area, both because they’re export-controlled away from some of the key technologies they need, and there’s also this issue of the emergent quality of chatbots being somewhat threatening to regimes that are sensitive to social harmony and stability. But make no mistake, they are a formidable adversary and will be leaders in this space. You then have a series of countries, the EU, England, France, etc., who are going to be very consequential here, particularly in terms of regulation. Then you have countries that have a particular technology edge in this domain, those are places like Taiwan, South Korea, the Netherlands. And then, most interestingly, you have countries like the UAE… who have done extraordinary work in building their Falcon open source model, the work they’ve done around Arabic language foundation models, and just the general infrastructure investing they’re doing.”

Considering the above highlights, we have compiled a list of the best AI stocks to buy, particularly the best small-cap AI stocks to buy now. These include some of the best cheap AI stocks to buy in 2024.

A scientist at a computer station, surrounded by a neural network of artificial intelligence code.

Our Methodology

We used Insider Monkey’s hedge fund data for the fourth quarter to compile our list of the best AI stocks to buy now and then shortlisted the stocks with a market capitalization of less than $2 billion as of March 11. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number, highlighting their popularity among investors today. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by over 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

Best Small Cap AI Stocks To Buy Now

11. Duos Technologies Group Inc. (NASDAQ:DUOT)

Number of Hedge Fund Holders: 2

Market Capitalization: $29.57 million

Duos Technologies Group Inc. (NASDAQ:DUOT) is a systems software company based in Jacksonville, Florida. The company designs, develops, deploys, and operates intelligent technology solutions powered by AI in North America.

Two hedge funds were long Duos Technologies Group Inc. (NASDAQ:DUOT) in the fourth quarter, with a total stake value of $217,000.

Holding 62,536 shares in the company, Becker Drapkin Management was the largest shareholder in Duos Technologies Group Inc. (NASDAQ:DUOT) at the end of the fourth quarter.

Like NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Duos Technologies Group Inc. (NASDAQ:DUOT) is on its way to becoming one of the best AI stocks to buy now.

10. DarioHealth Corp. (NASDAQ:DRIO)

Number of Hedge Fund Holders: 4

Market Capitalization: $48.7 million

Four hedge funds were long DarioHealth Corp. (NASDAQ:DRIO) in the fourth quarter, with a total stake value of $6.5 million.

DarioHealth Corp. (NASDAQ:DRIO) is a healthcare technology company based in New York. It offers AI-powered digital health solutions for chronic conditions. It uses AI to monitor the conditions of those using its digital platform for the purposes of health management and is among the best AI stocks to buy.

Nantahala Capital Management was the largest shareholder in DarioHealth Corp. (NASDAQ:DRIO) at the end of the fourth quarter, holding 2.3 million shares in the company.

9. CXApp Inc. (NASDAQ:CXAI)

Number of Hedge Fund Holders: 7

Market Capitalization: $29.46 million

CXApp Inc. (NASDAQ:CXAI) is an application software company based in Palo Alto, California. It provides a workplace experience platform for enterprise customers, and the platform is critically anchored on AI.

Seven hedge funds held stakes in CXApp Inc. (NASDAQ:CXAI) at the end of the fourth quarter, with a total stake value of $154,000.

8. Innodata Inc. (NASDAQ:INOD)

Number of Hedge Fund Holders: 7

Market Capitalization: $204.43 million

G2 Investment Partners Management was the most prominent shareholder in Innodata Inc. (NASDAQ:INOD), holding 125,000 shares in the company.

Based in Ridgefield Park, New Jersey, Innodata Inc. (NASDAQ:INOD) is a research and consulting services company and one of the best AI stocks to invest in. It provides AI data preparation services, collecting or creating training data, annotating training data, and training AI algorithms for its customers, alongside AI model deployment and integration services.

Innodata Inc. (NASDAQ:INOD) was spotted in the portfolios of seven hedge funds in the fourth quarter, with a total stake value of $8.1 million.

7. BigBear.ai Inc. (NYSE:BBAI)

Number of Hedge Fund Holders: 13

Market Capitalization: $545.29 million

Analysts at Cantor Fitzgerald hold an Overweight rating alongside a $3.5 price target on BigBear.ai Inc. (NYSE:BBAI) as of March 8.

BigBear.ai Inc. (NYSE:BBAI) is an IT consulting company based in Columbia, Maryland. The company offers AI and machine learning for decision support. It also offers high-end technology and management consulting services and is among the best AI stocks to buy.

Our hedge fund data for the fourth quarter shows 13 hedge funds long BigBear.ai Inc. (NYSE:BBAI), with a total stake value of $1.1 million.

6. SoundHound AI Inc (NASDAQ:SOUN)

Number of Hedge Fund Holders: 13

Market Capitalization: $1.88 billion

SoundHound AI Inc (NASDAQ:SOUN) is an application software company based in Santa Clara, California. The company develops independent voice AI solutions that enable businesses across automatic, TV, the Internet of Things, and customer service industries to deliver high-quality conversational experiences.

There were 13 hedge funds long SoundHound AI Inc (NASDAQ:SOUN) in the fourth quarter, with a total stake value of $12.2 million.

A Buy rating was maintained on shares of SoundHound AI Inc (NASDAQ:SOUN) on March 4, alongside a $7 price target, by analysts at HC Wainwright & Co.

Like NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), SoundHound AI Inc (NASDAQ:SOUN) is one of the best AI stocks to buy today.

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