We recently compiled a list of the 12 Best Small Cap AI Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Alight Inc. (NYSE:ALIT) stands against the other small cap AI stocks.
Former House Speaker Kevin McCarthy joined CNBC’s ‘Squawk Box’ on November 26 where he emphasized the need for a new group he has created, the Alpha Institute, which aims to advocate for pro-technology proposals. He highlighted the importance of focusing on long-term technological advancements, particularly in AI and quantum technology, which he believes are critical for America’s future competitiveness.
McCarthy noted that legislators often become bogged down in daily issues and fail to consider the long-term implications of their policies. He shared that three years ago, he initiated a course to educate members of Congress on AI and quantum technologies, recognizing their significance in various sectors such as energy and defense. He argued that without reforming processes like permitting and enhancing the energy grid, the US risks falling behind in the AI race.
Later on December 2, Jay Jacobs, head of US BlackRock Thematic and Active ETFs, joined ‘Halftime Report’ with CNBC’s Bob Pisani to discuss the key themes to watch in the ETF space heading into 2025. Jacobs emphasized that one major trend for 2025 will be the acceleration of AI infrastructure and its integration into consumer issues. He outlined 3 distinct stages of the AI theme: the build phase, where significant investments are made in infrastructure; the mass adoption phase across enterprises and individuals; and the transformation stage, which will see entirely new industries emerge from AI advancements.
Jacobs pointed out that during the build phase, ETFs focused on semiconductors, such as SOXX, and digital infrastructure like IDTT will benefit significantly. As companies adopt AI technologies, software names are expected to gain traction, leading to a transformation that could create new market opportunities over the next five to ten years.
Methodology
We sifted through media reports and ETFs to look for AI companies trading under $5 billion. That’s our definition of small-cap stocks. We then selected the 12 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 Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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).
A person viewing their financial progress on a computer, highlighting the financial health offerings of the company.
Alight Inc. (NYSE:ALIT)
Market Cap as of December 2: $4.35 billion
Number of Hedge Fund Holders: 40
Alight Inc. (NYSE:ALIT) is a global technology company specializing in cloud-based human capital management solutions. It offers a range of services, including employee benefits, healthcare navigation, and financial well-being. It uses AI and ML to automate processes, improve decision-making, and enhance the overall employee experience.
Alight LumenAI, the company’s next-generation AI engine, is specifically designed to enhance the company’s Alight Worklife platform. The Worklife platform itself is designed to improve the overall employee experience through the strategic application of AI and analytics.
LumenAI takes this platform to the next level by integrating new and existing AI capabilities into a unified ecosystem. This integration empowers organizations to fully harness the potential of AI, offering a range of benefits. LumenAI enables personalized experiences for each employee, optimizing benefits, learning opportunities, and overall engagement. By automating routine tasks, LumenAI frees up human resources to focus on strategic initiatives and innovation.
Alight Inc.’s (NYSE:ALIT) commitment to AI innovation is reflected in its strategic investments in AI talent, infrastructure, and governance. The company is well-positioned to guide clients on their employee journey, streamlining operations, enhancing agility, and meeting both client needs and long-term financial goals.
Polen U.S. Small Company Growth Strategy stated the following regarding Alight, Inc. (NYSE:ALIT) in its Q3 2024 investor letter:
“We exited four positions during the quarter, including SiTime, AppFolio, RH, Doximity, and Alight, Inc. (NYSE:ALIT). Our position in Alight, a benefits outsourcing and business process-as-a-service company, was an unsuccessful investment. We decided to move on due to activist pressure that led to a breakup of the business. We were dissatisfied with both the plan and the new standalone business. This culminated with the CEO leaving and uncertainty over the company’s long-term strategic direction. As a result, we felt it was time to move on with better investment ideas in our pipeline.”
Overall ALIT ranks 1st on our list of the best small cap AI stocks to buy according to hedge funds. As we acknowledge the potential of ALIT as an investment, 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 ALIT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
