5 Best Small Cap AI Stocks to Invest In

In this article, we discuss the 5 best small cap AI stocks to invest in. If you want to read about some more small cap AI stocks, go directly to 11 Best Small Cap Ai Stocks to Invest In.

5. Cognex Corporation (NASDAQ:CGNX)

Number of Hedge Fund Holders: 30

Cognex Corporation (NASDAQ:CGNX) creates, develops, produces, and distributes a wide range of image-based devices, all of which employ artificial intelligence (AI) methodologies to make choices that are equal to those of people based on what they perceive. Since the company’s establishment in 1981, Cognex Corporation (NASDAQ:CGNX) has sold about 3 million image-based devices, totalling over $9 billion in sales.

Cognex Corporation (NASDAQ:CGNX) acquired German lighting technology innovator SAC Sirius Advanced Cybernetics. The acquisition will give Cognex Corporation (NASDAQ:CGNX) access to cutting-edge computational lighting technology.

Cognex Corporation (NASDAQ:CGNX)‘s P/E ratio of 39.1x is higher than the 16.11x average of its competitors. This means that the stock is trading higher than the electronic sector average. Cognex Corporation (NASDAQ:CGNX) earned $177 million in operating cash flow in the first nine months of 2022. In addition, the company anticipates revenue of $235 million to $255 million in the fourth quarter. 

Artisan Partners mentioned Cognex Corporation (NASDAQ:CGNX) in its Q2 2022 investor letter. Here is what the fund said:

“Cognex Corporation (NASDAQ:CGNX) is a leading manufacturer of machine vision systems used to automate/improve processes in manufacturing and logistics. The company has achieved solid growth and profitability over its history, but we suspect slowing growth in key end markets such as consumer electronics and e-commerce distribution may lead to demand weakness for its products in the near term. In addition, inflation is pressuring the company’s gross margins. Thus, we exited our position in favor of other alternatives.”

4. Vimeo, Inc. (NASDAQ:VMEO)

Number of Hedge Fund Holders: 30

Vimeo, Inc. (NASDAQ:VMEO) is an exclusive video software solution, offering a full range of video capabilities via a software-as-a-service architecture. Vimeo Enterprise, Vimeo OTT, and Vimeo Custom are some of its sales-assisted programmes. Customers utilize its goods in more than 190 different nations.

Over 1.6 million people are presently members to Vimeo, Inc. (NASDAQ:VMEO), including 9,500 paying sales-assisted clients. In addition, the company boosted the number of companies it provided sales assistance to by adding clients like Rivian Automotive, Inc. (NASDAQ:RIVN), Credit Karma, Moderna, Inc. (NASDAQ:MRNA), Cars.com Inc. (NYSE:CARS), Bobs Discount Furniture, PwC, AstraZeneca PLC (NASDAQ:AZN), and Harvard Graduate School of Design. 

In its Q2 2022 investor letter, Longleaf Partners Fund mentioned Vimeo, Inc. (NASDAQ:VMEO). Here is what the fund said:

“Vimeo – Digital software company Vimeo is another newer tech-related holding that declined in the quarter. The company continues to be misunderstood as a consumer company, when actually a large portion of the value and the growth comes from its shift to being more of an enterprise company doing business with larger customers. However, this transition has taken longer than expected, and the COVID boost of the last year created difficult comps. While we believe having Joey Levin of IAC and other aligned shareholders on the board is a benefit, our value has declined since our initial purchase, and we did not add in the quarter.”

3. Regal Rexnord Corporation (NYSE:RRX)

Number of Hedge Fund Holders: 29

Regal Rexnord Corporation (NYSE:RRX) is a global provider of industrial powertrain solutions, power transmission components, electric motors and electronic controllers, air moving products, and speciality electrical components and systems. Regal Rexnord Corporation (NYSE:RRX)’s main business divisions are Commercial Systems, Industrial Systems, Climate Solutions, and Motion Control Solutions.

Regal Rexnord Corporation (NYSE:RRX)‘s Q3 revenues and profits exceeded expectations. The company reported revenue of $1.33 billion, beating the estimates by $20 million. The Industrial segment increased Regal Rexnord Corporation (NYSE:RRX)’s adjusted EBITDA margins by about 700 basis points by using lean tools assiduously. Industrial Systems’ net sales climbed 10.5% to $163.5 million, or 14.7% on an organic basis. 

TimesSquare Capital Management mentioned Regal Rexnord Corporation (NYSE:RRX) in its Q3 2022 investor letter. Here is what the fund said:

“Back to the positives, there was Regal Rexnord Corporation (NYSE:RRX) that specializes in motion control systems, climate solutions, and similar mechanical components for a variety of end markets. Regal reported better-than-expected revenues and earnings, plus management raised its guidance for the remainder of 2022. Though order volumes declined, that change was still better than feared and all its business lines showed organic growth from better prices. That produced a 24% lift for Regal’s shares.”

2. Ambarella, Inc. (NASDAQ:AMBA)

Number of Hedge Fund Holders: 28

Ambarella, Inc. (NASDAQ:AMBA) develops semiconductors for high-definition video compression and image processing. Ambarella’s technology is used in advanced driving assistance systems (ADAS), electronic reflectors, drive recorders, driver/cabin monitoring, autonomous vehicles, and a host of other applications combining computer and human vision.

Ambarella, Inc. (NASDAQ:AMBA) is not just well-positioned to endure the current semiconductor slowdown, but its products are also in high demand currently. Its cutting-edge AI vision processor technology is gaining clients and design wind in a robust market for electric vehicles. Due to the Occuli acquisition, the company’s cash balance is lower than last year, although it is increasing sequentially. It enables the business to buy securities and improve its overall position.

Carillon Tower Advisers mentioned Ambarella, Inc. (NASDAQ:AMBA) in its Q1 2022 investor letter. Here is what the fund said:

“Ambarella (NASDAQ:AMBA) supplies video processing and computer vision chips used in the security and automotive markets. The company continues to face supply headwinds from its foundry partner despite robust market demand for Ambarella’s products.”

1. Freshworks Inc. (NASDAQ:FRSH)

Number of Hedge Fund Holders: 27

Freshworks Inc. (NASDAQ:FRSH) is a SaaS platform that allows small and medium-sized companies to help customers through e-mail, phone, website, and social media. The business provides solutions to use popular social media for customer care, multi-product support, a knowledge library, a self-service portal, community forums, and more. The worldwide operations of Freshworks Inc. (NASDAQ:FRSH) serve more than 58,000 clients.

Markets that Freshworks Inc. (NASDAQ:FRSH) competes in are quite cutthroat. When comparing its performance to its rivals, Freshworks Inc. (NASDAQ:FRSH) reported a 33.27% year-over-year growth in total revenue during the third quarter of 2022. The sales increase outpaced the same-quarter 11.78% average revenue growth of Freshworks Inc’s rivals. Due to a significant increase in overall revenue of 33.27%, Freshworks Inc. (NASDAQ:FRSH) increased its market share to around 0.05%.

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily newsletter to get  the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out our articles on 12 Best Affordable Stocks to Buy Under $5 and 14 Best Agriculture Stocks to Buy Now.