We recently compiled a list of the 7 Most Popular AI Penny Stocks Under $5. In this article, we are going to take a look at where Lantronix, Inc. (NASDAQ:LTRX) stands against the other 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).
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Lantronix, Inc. (NASDAQ:LTRX)
Number of Hedge Fund Holders: 13
Lantronix, Inc. (NASDAQ:LTRX) is a global provider of Internet of Things (IoT) solutions which help businesses connect devices to the Internet. It specializes in connectivity, compute, and software technologies that enable devices to connect and communicate securely with higher efficiency, in industries like healthcare, transportation, building automation, and retail.
In FQ2 2024, the company generated a revenue of $41.2 million, beating estimates by $962,800 and logging a 25% year-over-year growth. The earnings per share were $0.11 and also exceeded expectations by $0.01. IoT System Solutions revenue alone surged by 91% year-over-year.
Lantronix, Inc. (NASDAQ:LTRX) is expanding in the smart grid and automotive sectors. They secured a repeat order from a major smart grid customer and are actively engaging with automotive original equipment manufacturers (OEMs) to provide solutions for interactive displays and digital cockpits.
It is combining edge computing devices with its Percepxion IoT software to make it easier for businesses to use AI in an edge network orientation. This way, businesses can process data closer to where it’s created, improving efficiency and reliability.
Recently, it entered into a cooperation agreement with 180 Degree Capital, a significant shareholder. This included the nomination of directors, Derhacobian and Palatnik, bringing extensive experience in the technology industry to contribute to improvements at the company.
As Lantronix, Inc. (NASDAQ:LTRX) continues to make strides in the Internet of Things (IoT) industry with newer developments and partnerships, it has the potential to become a multibagger in the years to come. LTRX is ranked 2nd among the best AI penny stocks to buy right now.
13 hedge funds hold this company as of June 30, with First Eagle Investment Management being the highest shareholder, with a position of $3.03 million.
Wasatch Micro Cap Value Strategy stated the following regarding Lantronix, Inc. (NASDAQ:LTRX) in its first quarter 2024 investor letter:
“Another significant detractor was Lantronix, Inc. (NASDAQ:LTRX), which provides integrated software and application development, software as a service (SaaS) management, intelligent edge computing and a wide range of sensors and trackers. The stock moved higher early in the quarter based on expectations for strong revenues and earnings. But when the numbers were released later in the quarter, the stock plummeted because Lantronix failed to meet expectations. While we were disappointed along with other investors, we note that revenues and earnings did in fact increase—albeit modestly. Considering the attractive valuation currently, we’ve maintained our position in the company.”
Overall LTRX ranks 2nd on our list of the most popular AI penny stocks to buy under $5. While we acknowledge the potential of LTRX as an investment, our conviction lies in the belief that some 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 LTRX 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.
