We recently compiled a list of the 11 Best AI Penny Stocks to Invest in Now and in this article we will give you an AI penny stock that can be worthy of exploring in case you missed buying NVIDIA Corporation (NASDAQ:NVDA) when it was trading under $500 per share at the beginning of the year.
It’s no secret that semiconductors are among the best pick-and-shovel plays for those looking to invest in the booming Artificial Intelligence sector. NVIDIA Corporation (NASDAQ:NVDA) saw its stock surge by more than 150% over the past year. This growth can almost solely be attributed to increased demand for its Graphic Processing Units (GPUs), which are perfect for processing large amounts of data required in various AI and machine learning applications.
Amid this strong performance, NVIDIA Corporation (NASDAQ:NVDA) was included in the so-called “Magnificent Seven”, a group of the largest publicly-traded companies. However, as the AI boom continues, NVIDIA Corporation (NASDAQ:NVDA) is expected to continue to deliver solid returns to investors. The stock currently saw its price target upped by Goldman Sachs. Analyst Toshiya Hari raised the price target to $1100 from $1000 and reiterated the ‘Buy’ rating. In the research note, the analyst mentioned that the sustainable nature of NVIDIA Corporation (NASDAQ:NVDA)’s growth suggests that the stock is trading at an attractive valuation.
The strong fundamentals suggest that NVIDIA Corporation (NASDAQ:NVDA) is a good pick for risk-averse investors looking for solid long-term returns. Therefore, it’s not surprising that the stock is one of the most popular among hedge funds tracked by Insider Monkey. According to the latest round of 13F filings, 186 out of 920 hedge funds tracked by Insider Monkey were bullish on NVIDIA at the end of March. We are following this metric because 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).
Enter Navitas Semiconductor
However, for risk-tolerant investors, we can suggest looking at Navitas Semiconductor Corp (NASDAQ:NVTS). Similarly to NVIDIA, Navitas is a semiconductor stock, but it is currently trading at less than $4 per share, which makes it one of the best AI penny stocks to buy now. It may not reach the size of NVIDIA Corporation, but it’s worth remembering that in 2014, NVIDIA was trading at less than $5 per share.
Navitas Semiconductor Corp (NASDAQ:NVTS) is a small-cap company that is focused on power semiconductors, such as gallium nitride power integrated circuits and silicon carbide power devices. Basically, it is developing semiconductors that are used in power supply for various devices. In this way, Navitas’ products have a wide range of applications, including mobile phones, laptops, and consumer electronics. Moreover, Navitas supplies semiconductors to some high-growth industries, such as Data Centers, electric vehicles, and solar inverters. Among the company’s clients are Dell, Lenovo, Xiaomi, Amazon, OPPO, and Motorola. Most of the company’s products that are currently being shipped are used in mobile device chargers.
A technician in a pristine lab, focused on designing a new semiconductor chip.
On a financial side, things look good for Navitas. The company has seen strong revenue growth over the past several quarters. In the first quarter of 2023, Navitas Semiconductor Corp (NASDAQ:NVTS) saw its revenue grow by 73% to $23.2 million. The company has been seeing robust top-line growth over the past several quarters. However, the costs are also quite high and Navitas has yet to report a profitable quarter. For the first quarter, Navitas posted a net loss of $0.02 per share, significantly lower than the $0.39 loss posted a year earlier. Both first-quarter revenue and net loss were above analysts’ expectations of $22.92 million and a loss of $0.15 per share, respectively.
Navitas As a Pick-and-Shovels AI Play
Despite the revenue growth and the further revenue growth potential, Navitas Semiconductors Corp (NASDAQ:NVTS) has seen its stock lose 48% since the beginning of the year. In an environment where most semiconductor stocks recorded gains, this doesn’t look good. One of the reasons for the decline, was explained by the company’s CEO Gene Sheridan on CNBC.
“We’re not shipping to AI today, so our stock price reflects that,” Sheridan said.
However, the CEO added that Navitas plans to change that soon. The company plans to develop and market power chip technology that could be used to power AI-focused data centers. The company is developing power platforms that could provide higher power output to meet the demand required by AI processors, such as NVIDIA’s Grace Hopper H100 and recently announced Blackwell chips. These chips demand between 700W to 1,000W and more power, which is significantly higher than 300W demanded by traditional CPUs. Navitas said it has around 30 customer projects in development and expects its power chips to be used in data centers at Amazon.com, Inc. (NASDAQ:AMZN)’s AWS, Microsoft Corporation (NASDAQ:MSFT)’s Azure, Alphabet Inc (NASDAQ:GOOGL)’s Google, and Baidu Inc (NASDAQ:BIDU).
Check out our report about the cheapest AI stock and find out which company is as promising as Microsoft but that trades at less than five times its earnings.
What Smart Money and Sell-Side Think About Navitas
As stated earlier, we believe that Navitas Semiconductors Corp (NASDAQ:NVTS) is one of the best AI penny stocks to buy now based on the hedge fund sentiment. At the end of March, there were 11 funds in our database bullish on the stock, down from 18 a quarter earlier. At the end of March, these funds held $80 million worth of shares.
Analysts also generally see potential upside in Navitas Semiconductors Corp (NASDAQ:NVTS). In May, following the earnings release, four analysts reiterated their buy ratings on the stock, although they did lower their price targets. Among these, the highest price target is currently assigned by Rosenblatt Securities, which has a $10 target. Other three analysts, at Robert W. Baird, Needham & Company LLC, and Deutsche Bank have a $7.00 price target. On the other hand, analysts at Jefferies, downgraded the stock to Hold from Buy and slashed the price target down to $4.00.
In conclusion, Navitas Semiconductors Corp (NASDAQ:NVTS) is a penny stock worth exploring. The company is advancing its developments to get more exposure to the AI sector, albeit it is late to the party. On the other hand, it has a broad pipeline of applications across various sectors and can unlock more growth in other areas. For example, in automotive, Navitas Semiconductors Corp (NASDAQ:NVTS) plans to start production of chips for EV chargers and has several big names among its customers, including Volvo, Smart, and Zeekr Intelligent Technology Holding Ltd (NYSE:ZK).
If you want to explore other AI stocks under $5 that smart money is bullish on, check out our free report on the 11 Best AI Penny Stocks to Invest in Now.
If you are looking for an AI stock that is more promising than Micron 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.