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 Synaptics Inc. (NASDAQ:SYNA) 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 technician inspecting a newly-manufactured semiconductor product.
Synaptics Inc. (NASDAQ:SYNA)
Market Cap as of December 2: $3.29 billion
Number of Hedge Fund Holders: 23
Synaptics Inc. (NASDAQ:SYNA) specializes in human interface solutions, including touchpads and touchscreens. Recently, it has shifted its focus towards edge AI, aiming to enhance device intelligence. By incorporating AI into its products, it enables devices to better understand and respond to user interactions.
It delivered strong quarterly performance, with revenue up 8.41% in FQ1 2025, as compared to the year-ago period. A key driver of this growth is the company’s focus on AI-powered solutions. One such solution is the AI hub, an innovative product that connects multiple devices, reducing the need for cloud connectivity, designed to empower edge devices with advanced AI capabilities, enabling them to perform complex tasks locally. This approach offers significant benefits, including reduced latency, improved privacy, and lower power consumption.
This shift towards edge computing aligns with industry trends and addresses the growing demand for intelligent and autonomous devices. The AI hub is poised to revolutionize the way devices interact and operate, opening up new opportunities for growth and innovation. The company’s commitment to innovation and focus on AI-driven solutions position it for continued success.
TimesSquare Capital U.S. Small Cap Growth Strategy stated the following regarding Synaptics Incorporated (NASDAQ:SYNA) in its first quarter 2024 investor letter:
“Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, and systems that improve productivity or efficiency for their clients. Synaptics Incorporated (NASDAQ:SYNA), a developer of human interface semiconductor solutions for electronic devices and products, sold off by -14%. The revenue picture for the fiscal second quarter was mixed with a strong rebound in mobile offsetting declines in Internet-of-Things as well as enterprise & auto. Earnings were better than expected due to strong operating expense control.”
Overall SYNA ranks 3rd on our list of the best small cap AI stocks to buy according to hedge funds. As we acknowledge the potential of SYNA 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 SYNA 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.