We recently published a list of 12 Best Artificial Intelligence Stocks To Invest In Under $10. In this article, we are going to take a look at where Cerence Inc. (NASDAQ:CRNC) stands against the other best artificial intelligence stocks to invest in under $10.
The tech market is poised for an explosive growth phase as the AI revolution accelerates. Dan Ives, Global Head of Technology Research at Wedbush Securities, recently appeared on CNBC on November 25 to discuss the current state of the tech market, predicting that it will be “on fire” as the AI revolution enters its next phase, marking the beginning of what he considers a fourth industrial revolution. Ives emphasized that the software segment of AI is now critical, with expectations that AI software companies will lead this growth. Ives believes that the consumption model in enterprise AI, driven by advancements from major chipmakers, will lead to underestimated growth rates of 15% to 20% for these software companies.
Ives also addressed the impact of bond yields and currency strength on the tech trade, noting that while these factors could present headwinds, they are already factored into market guidance. He expressed confidence in a strong demand perspective that could propel the NASDAQ to 20,000 in the next two years, with aspirations for it to reach 25,000 thereafter. Furthermore, he sees potential benefits from deregulation in the tech industry, suggesting that it could facilitate significant M&A activity. Ives remains bullish on the tech sector as it adapts to evolving market conditions driven by AI advancements.
Earlier, on November 22, Jeff Richards, Notable Capital managing partner, joined CNBC’s ‘Closing Bell’ to discuss the tech trade and the tailwinds for the software sector as well. He noted that while growth rates for software companies have decelerated compared to 2 or 3 years ago when many public companies were growing over 50%, growth is resurgent now. Richards pointed out that the peak multiples for software stocks were significantly higher in late 2021, but current valuations are more attractive, especially as AI begins to play a critical role in driving growth.
Richards emphasized that AI is not just a future prospect but is actively influencing the market now, with private companies reporting that 60% to 70% of their recent bookings are AI or AI-related. He mentioned that the infrastructure build-out for AI is comparable to historical investments in physical infrastructure, with major tech companies collectively spending around $300 billion annually. This investment is expected to lead to significant advancements in both the enterprise and consumer software sectors.
He also highlighted the global nature of this evolution, noting that major tech players from MAG7 are not only serving US customers but are also expanding their reach into international markets. This global perspective is crucial as these companies leverage their cash flow to invest in AI infrastructure, which Richards believes will shape the future of technology.
Richards remains optimistic about the technology sector’s trajectory, as does Ives, particularly as it adapts to the growing influence of AI and its applications across various industries.
A man with an AI powered virtual assistant, demonstrating the coexistence of the two.
Our Methodology
We sifted through Finviz and internet lists to compile a list of top AI stocks trading below $10. 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).
Cerence Inc. (NASDAQ:CRNC)
Share Price as of November 27: $6.47
Number of Hedge Fund Holders: 10
Cerence Inc. (NASDAQ:CRNC) provides AI-powered virtual assistant solutions for the mobility and transportation industry. Its solutions include speech recognition, natural language understanding, and text-to-speech technologies, enhancing the user experience in vehicles. The company has a strong focus on GenAI and LLMs. Its proprietary AI platform, powered by LLMs, is driving innovation in the automotive industry.
The recent launch of CaLLM Edge, the first LLM running in automotive on the Edge, enables advanced and simplified voice interaction, even when the vehicle is offline. This groundbreaking technology, developed in collaboration with Microsoft, demonstrates Cerence Inc.’s (NASDAQ:CRNC) commitment to pushing the boundaries of in-vehicle AI.
Its strong financial performance and strategic focus on AI position the company for continued growth and success in the years to come. Cerence Inc. (NASDAQ:CRNC) has reported its FQ4 and full-year 2024 results, highlighting a strategic focus on cost reduction and operational efficiency. The company exceeded FQ4 2024 revenue expectations, generating $54.81 million, driven by decreased operating expenses, although marking a 32.14% year-over-year revenue drop.
By leveraging LLMs, Cerence Inc. (NASDAQ:CRNC) is transforming the in-car experience. The company’s AI solutions enable natural language interaction, allowing drivers to control various vehicle systems using simple voice commands. The company is poised to drive future growth and create long-term value for shareholders.
Meridian Contrarian Fund stated the following regarding Cerence Inc. (NASDAQ:CRNC) in its Q2 2024 investor letter:
“Cerence Inc. (NASDAQ:CRNC) develops human-automotive interface software that provides drivers and passengers with applications ranging from infotainment to safety and, eventually, autonomous driving. We became shareholders when the company was spun off from a previous holding and the market assigned little value to the new company. The stock performed strongly for us initially and we were able to harvest significant profits. We maintained a position despite weak results over the past two years due to our belief that Cerence’s large market share, with software in over 50% of cars globally, should lead to significant growth opportunities. During the quarter the stock pulled back on missed earnings and reduced full-year and long-term forecasts. This continued poor fundamental performance convinced us that we might be wrong about the market opportunity, and we sold our entire position.”
Overall, CRNC ranks 7th on our list of best artificial intelligence stocks to invest in under $10. While we acknowledge the growth potential of CRNC, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRNC 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.
