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 Ambarella Inc. (NASDAQ:AMBA) 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 scientist in a lab coat and goggles operating a state-of-the-art semiconductor production line.
Ambarella Inc. (NASDAQ:AMBA)
Market Cap as of December 2: $2.92 billion
Number of Hedge Fund Holders: 30
Ambarella Inc. (NASDAQ:AMBA) is a leading-edge AI semiconductor company focused on high-performance, low-power video processing solutions. Its chips power a range of devices, including action cameras, drones, security cameras, and automotive systems. By enabling AI applications to be executed at the edge of a network, its technology reduces latency, enhances privacy, and optimizes system performance.
Its recent financial results highlight the strong demand for its AI-powered solutions. The company achieved record AI revenue in Q3, driven by the success of its new higher-priced AI processors, particularly the 5nm CV5 processor. This led to a 30% sequential revenue increase and a 63.36% year-over-year growth.
The company’s product roadmap is centered around a series of AI waves, each focusing on specific market segments and technologies. The first wave, driven by the CV5 and CV7 processors, is targeting both automotive and IoT applications. The second wave will introduce the CV3 AD family of SoCs, which are designed for advanced Level 2+ and higher levels of autonomy in the automotive market.
Its commitment to AI innovation is evident in its strategic investments in research and development. Ambarella Inc.’s (NASDAQ:AMBA) team of engineers is continuously pushing the boundaries of AI technology, developing cutting-edge solutions that address the evolving needs of the market.
Overall AMBA ranks 2nd on our list of the best small cap AI stocks to buy according to hedge funds. As we acknowledge the potential of AMBA 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 AMBA 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.
