In this article, we’re going to discuss the 7 Most Popular AI Penny Stocks Under $5.

An Analysis of AI Breakthroughs

Artificial intelligence has become increasingly important for businesses and industries to thrive in today’s rapidly evolving economy. Grand View Research reported that the global AI market was valued at $196.63 billion in 2023 and is expected to grow at a compound annual growth rate of 36.6% from 2024 to 2030 and reach $1.81 trillion by the end of the forecast.

Tech giants are driving AI adoption. Wall Street’s favorite GPU maker experienced significant growth, with its market cap surpassing $3 trillion on the back of strong demand for GPUs. In March, the Blackwell platform was introduced which featured the GB200 super chip, further dominating the AI chip market. This chip can train AI models with over a trillion parameters, which is essential for developing advanced large language models (LLMs).

This advancement of natural language processing in AI is a significant breakthrough. AI language models are integrated into the business world and beyond. Expert economists Joseph Briggs, and Devesh Kodnani report that the ability of AI tools to generate human-quality content is a huge milestone, bridging the communication gap between humans and machines. According to Goldman Sachs’ investment advisors, these AI tools could be valued at $7 trillion in the next 10 years, contributing to a 7% increase in global GDP.

A recent study from Stanford University found that businesses train AI models faster than academic institutions. In 2023, the industry-trained AI neared 51 significant machine learning models, while academia managed only 15. This trend persisted in 2024 despite rising training costs. ChatGPT 4, the latest model of ChatGPT, cost about $80 million to train. Google’s Gemini Ultra cost around $191 million.

OpenAI’s approach to fostering collaborative partnerships instead of competing directly with tech giants makes it an exceptional model. Macquarie’s Fred Havemeyer (lead software equity research analyst) praised GPT 4 for its “emotional intelligence”. The growing demand for AI chips, exemplified by OpenAI’s use of over 1.7 trillion parameters in its GPT 4 model, will further help NVIDIA and other AI chip manufacturers grow.

On August 20, Bloomberg reported that OpenAI is releasing a feature that will allow businesses to use their company data to customize GPT 4 so that it can be trained on additional information for niche tasks. This is an example of letting companies fine-tune the AI model to act as a customer-service chatbot for their subject areas. According to DeepL CEO, Jarek Kutylowski, specialised AI models are essential for companies to grow vertically.

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%.

Some big economic gains from AI in 2030 will come from China with a 26% boost to GDP, and North America with a 14.5% boost, accounting for almost 70% of the global economic impact. The impact of AI is evident when we see instances like half of CNBC Disruptor 50 companies incorporating AI into their core operations. 34 companies consider it critically important to their revenue, while 13 identify generative AI as a key sales driver.

By 2025, 97 million people are expected to be employed in AI-related roles, many people have also lost their jobs to AI. Bloomberg reported that more than 130,000 employees have been laid off across over 400 companies this year. This number is still down by 40% compared to the layoffs of 2023. Companies find this is the only way to cut costs and are hence ramping up investments in AI.

There are also concerns about AI leading to a safer space for scammers due to its ability to create convincing fake images and messages. Berkshire Hathaway Chairman and CEO Warren Buffet says that AI scamming will be the next big ‘growth industry’.

Most analysts and experts are bullish on AI over the long term. According to Goldman Sachs analysts, many businesses plan on spending over $1 trillion on AI infrastructure in the upcoming years. In August, Nicole Peng, senior vice president of mobility at Canalys suggested that the AI industry could potentially be recession-proof. This is because AI advancements are not just ‘improvements’ on existing businesses, but rather fill an unavoidable consumer demand for increased efficiency and improved solutions for companies.

The AI industry is booming and every industry and company has been disrupted since the launch of ChatGPT. Finding untapped AI stocks with huge growth potential is a challenge right now and this is where we come in. Let’s now look at the best AI penny stocks to buy now according to hedge funds.

Our Methodology

To compile our list, we sifted through ETFs, online rankings, and Reddit threads to compile a list of 12 AI penny stocks. We then selected the 7 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).

7 Most Popular AI Penny Stocks Under $5

7. Beamr Imaging Ltd. (NASDAQ:BMR)

Number of Hedge Fund Holders: 1

Beamr Imaging Ltd. (NASDAQ:BMR) is an Israel-based video technology and image science software company. It creates software that enhances video and image quality, without using a lot of data (50% reduction).

The product portfolio includes software development kits, bitrate control libraries (amount of data transmitted per unit of time), and photo optimization tools. These solutions are used by businesses worldwide.

In the first 6 months of 2024, revenues increased by 5% to $1 million, as compared to the same period in 2023. The increase was driven by signing new license agreements offset by those terminated. Beamr Imaging Ltd. (NASDAQ:BMR) estimates generating $3.50 million in revenue by the end of 2024, with 2.25% year-over-year growth.

Q2 2024 featured many developments — Beamr Cloud video services integrated AI features, and an improved product pricing model for businesses was introduced through special plans, subscriptions, and prepaid packages.

Video processes now focus on AI-integrated developments as much as storage and streaming challenges. Beamr Cloud’s AI services allow searching inside the video (like in text) and automate transcription generation in multiple languages. It accelerates delivery to customers in higher quality. Later this year, the company plans to release additional video AI enhancement features.

In February, the company raised about $13.8 million by selling shares. Haggai Barel was recently appointed as COO to contribute to R&D, product, and marketing, and seeking new collaborations, such as those with AWS, OCI, and Nvidia. Beamr Imaging Ltd. (NASDAQ:BMR) is one of the most popular AI penny stocks to buy right now.

6. Predictive Oncology Inc. (NASDAQ:POAI)

Number of Hedge Fund Holders: 2

Predictive Oncology Inc. (NASDAQ:POAI) is a knowledge and science-driven company that uses AI to help find and develop better cancer treatments.

In Q2 2024, the company recorded revenues of $279,000, compared to $490,000 for the same period in 2023. The net loss per share was $0.68, as compared to $0.98 in Q2 2023.

Revenues primarily came from the company’s EGAN operating segment. This segment focuses on using AI for drug discovery and development processes, such as analyzing large collections of tumor samples to see how patients respond to drugs and improve treatment results. It collaborates with hospitals and research institutions.

Predictive Oncology Inc. (NASDAQ:POAI) has expanded AI offerings to discover new biomarkers for cancer. A recent study with UPMC Magee-Womens Hospital identified factors that drive overall survival in ovarian cancer. Such advancements help address unmet needs in oncology, such as ovarian cancer, where treatment options are limited. Management pointed out that the biomarker discovery market is estimated at over $51 billion in Q2 2024.

One key advancement is the new 3D cell culture technology, which offers an accurate method for testing drug candidates, reducing costs and time to market. At the Q2 earnings call, the management said that the 3D cell market is expected to grow from $1.4 billion in 2022 to $5.3 billion in 2032, representing 14% annual growth. Such ventures make Predictive Oncology Inc. (NASDAQ:POAI) one of the best AI penny stocks to buy right now. The stock is a best-positioned enabler of AI’s use in oncology, an industry that’s extremely early in its growth story.

2 hedge funds hold stakes in the company, as of June 30, with Renaissance Technologies being the top shareholder with a position worth $25,663.