20 Hidden Gem AI Stocks

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1. Pegasystems Inc. (NASDAQ:PEGA)

Number of Hedge Fund Holders: 27   

Pegasystems Inc. (NASDAQ:PEGA)  develops, markets, licenses, hosts, and supports enterprise software in the United States. The company is an important player in the AI-powered workflow automation and decisioning market. One of the most popular AI innovations of the company is the Pega GenAI Blueprint, a tool which helps businesses revolutionize their processes by integrating generative AI capabilities to optimize decision-making and automate workflows. On the back of rising sales of this tool, the firm expects to reach close to $1.5 billion in revenue in 2024, up nearly 16% year-on-year. Additionally, Pega has been focusing on improving margins, particularly with their Pega Cloud, which achieved a gross margin of 77% in Q1 2024. It expects free cash flow to reach $350 million in 2024, up from $201 million in 2023.

Citi recently raised the price target on Pegasystems Inc. (NASDAQ:PEGA) stock to $92 from $87 and kept a Buy rating on the shares. The advisory updated models and preference rankings across the back office software group post the Q2 results, seeing potential for underappreciated SMID-cap software names to re-rate amid a more risk-on rate cut cycle with stability in IT budget spend and emerging AI opportunities.

While we acknowledge the potential of Pegasystems Inc. (NASDAQ:PEGA) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Pegasystems Inc. (NASDAQ:PEGA) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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