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 Plexus Corp. (NASDAQ:PLXS) 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).
An overhead view of an electronic manufacturing plant, its intricate machinery and precision automation in action.
Plexus Corp. (NASDAQ:PLXS)
Market Cap as of December 2: $4.51 billion
Number of Hedge Fund Holders: 17
Plexus Corp. (NASDAQ:PLXS) is a leading electronics manufacturing services (EMS) provider that uses AI to optimize its operations, such as predictive maintenance, quality control, supply chain optimization, and robotics, to enhance efficiency, reduce downtime, and ensure high-quality product delivery. These AI applications enable it to deliver innovative solutions to its customers across various industries.
The company’s fiscal fourth-quarter 2024 performance was significantly driven by robust demand in the healthcare and life sciences sector, as reflected in the higher-than-anticipated revenue of $1.05 billion, a 2.6% year-over-year improvement. This sector’s growth was primarily due to the successful launch of new products and increased demand for engineering solutions.
Its ability to develop and manufacture complex medical devices also contributed to its strong performance in this segment. AI-driven predictive analytics were used to identify potential supply chain disruptions and optimize inventory levels, ensuring timely delivery of critical components. Plexus Corp.’s (NASDAQ:PLXS) focus on innovation, coupled with the strategic use of AI, positioned it well to capitalize on the growing demand for advanced medical devices and life science instruments.
Bernzott Capital Advisors US Small Cap Value Fund stated the following regarding Plexus Corp. (NASDAQ:PLXS) in its first quarter 2024 investor letter:
“Within Information Technology, our position in Plexus Corp. (NASDAQ:PLXS) also hurt as the stock declined 12% as their earnings release was mixed due to temporary destocking amongst their customers, more specifically within the healthcare segment. Quarterly results were below expectations as the company felt the negative impact from de-stocking from their customers, more specifically within their healthcare segment. This should be temporary with growth reaccelerating in future quarters. Backlog continues to grow which gives us confidence going forward. We maintained our position.”
Overall PLXS ranks 5th on our list of the best small cap AI stocks to buy according to hedge funds. As we acknowledge the potential of PLXS 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 PLXS 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.