We recently compiled a list of the 10 Best AI Penny Stocks to Buy According to Analysts. In this article, we are going to take a look at where BigBear.ai Holdings Inc. (NYSE:BBAI) stands against the other AI penny stocks.

Kim Forrest, chief investment officer at Bokeh Capital Partners, recently appeared on CNBC’s ‘The Exchange’ on November 13 to discuss why tech could be a winner in a new Trump administration, focusing her discussion on the current state of AI, particularly the distinction between large language models and smaller, targeted AI solutions.

Forrest noted that while LLMs have garnered significant attention and represent impressive technological advancements, they are not without their flaws. Specifically, she pointed out that these models are still prone to errors, which can hinder productivity and limit their practical applications in real-world scenarios. This concern leads her to advocate for what she refers to as small AI, which emphasizes targeted solutions aimed at addressing specific problems rather than attempting to cover a broad spectrum of tasks.

Her background as a software engineer and her experience working with AI tools have shaped her perspective on the matter. She believes that smaller, more focused AI models will ultimately prove to be more effective in driving productivity gains. Unlike the more complex and exotic LLMs that may resemble something out of science fiction, like HAL 9000 from “2001: A Space Odyssey”, small AI solutions are designed to tackle particular challenges efficiently. Forrest argues that this targeted approach is where true productivity can be realized, making small AI a compelling area for future development and investment.

When discussing investment opportunities in the tech sector, she highlighted several key players in the semiconductor industry that are essential for powering AI technologies. NVIDIA was noted as a natural leader in this space due to its dominance in graphics processing units (GPUs) that are crucial for AI computations. However, she also expressed continued confidence in AMD, despite its recent struggles in the market.

In addition to semiconductor companies, Forrest pointed out opportunities within software firms that are leveraging AI technologies. Microsoft was cited as a prime example, the company is actively working on providing access to LLMs while also narrowing focus to practical applications. For instance, it’s developing finance-oriented GenAI tools designed specifically for accounting tasks. This kind of targeted application exemplifies how LLMs can be adapted for specific industries, enhancing their utility and effectiveness.

Forrest also mentioned C3.ai as another noteworthy player in the AI space. It offers targeted AI solutions but has a significant service component mixed into its revenue model. While this diversification can provide stability, she cautioned that it may also limit scalability compared to bigger companies, which primarily focus on software products with higher margins. She emphasized the importance of understanding the business models of these companies when considering investment opportunities.

Overall, her insights reflect a nuanced understanding of the current tech landscape and the potential of both small and large AI solutions. She advocates for a balanced investment strategy that recognizes the strengths and weaknesses of various companies within the AI ecosystem. As AI continues to evolve, Forrest’s perspective underscores the critical need for investors to remain adaptable and informed about emerging trends and innovations in this dynamic field, which is why we’re here with a list of the 10 best AI penny stocks to buy according to analysts.

Methodology

We used ETFs, stock screeners, and financial media reports to compile an initial list of the top AI penny stocks, with a share price under $5. From that list, we narrowed our choices to 10 AI penny stocks that analysts were the most bullish on. The stocks are ranked in ascending order of analysts’ upside potential.

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).

BigBear.ai Holdings Inc. (NYSE:BBAI)

Average Upside Potential: 89.87%

Share Price as of November 5: $1.61

Number of Hedge Fund Holders: 9

BigBear.ai Holdings Inc. (NYSE:BBAI) specializes in providing AI-powered decision intelligence solutions for sectors like national security, supply chain management, and digital identity. It utilizes advanced technologies such as machine learning and predictive analytics to help organizations make informed decisions in complex environments. Its services cater to clients in defense, transportation security, and logistics, among others. Solutions include data processing and visualization tools that enhance operational efficiency and support critical decision-making processes across industries.

The company reported its third-quarter 2024 financial results. Its revenue grew 22.12% to $41.51 million, driven by increased demand for its solutions. A key quarter highlight was securing a substantial 5-year production contract worth $165 million with the US Army to deliver the GFIM-OE. This project leverages AI to transform legacy systems into a modern, intelligent platform, enhancing data-centric force management.

BigBear.ai Holdings Inc. (NYSE:BBAI) remains optimistic about its long-term prospects, acknowledging the cautious approach of governments towards AI but emphasizing its team’s expertise and the value of its technology. The demonstration of ConductorOS, its AI orchestration platform, showcases its potential to revolutionize military operations.

In the civilian sector, its biometric verification solution, veriScan, is now operational at Denver International Airport. This deployment streamlines the boarding process for international passengers, highlighting the practical application of AI in everyday life.

Beyond these specific achievements, the company’s broader involvement in projects with the US Army and FAA demonstrates its ability to deliver complex AI solutions for government agencies. This positions it as a key player in the development and implementation of cutting-edge AI technologies.

Overall BBAI ranks 7th on our list of the best AI penny stocks to buy according to analysts. As we acknowledge the growth potential of BBAI 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 BBAI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.