When it comes to investing in AI stocks, we often think of big names like Nvidia, Advanced Micro Devices, Microsoft, Meta Platforms, Amazon, and Alphabet. However, small-cap AI stocks hold a greater potential for high growth, albeit with higher risks due to their lower market caps. This volatility can create opportunities for investors looking to capitalize on rapid price spikes and sharp declines.
Here are three promising small-cap AI stocks that investors should consider:
1. Applied Digital Corp
Formerly known as Applied Blockchain, Applied Digital transitioned to focus on AI in 2021. The company hosts high-performance computing clusters across North America to support generative AI products. Recently, Applied Digital secured $160 million in private financing, led by institutional investors and supported by Nvidia and Related Companies. The company also achieved "Elite Partner" status under the NVIDIA Partner Network in August 2023.
Applied Digital reported a 67% revenue increase year-over-year in its fiscal Q1 2025 earnings, reaching $60.7 million. Despite a net loss of $4.2 million, the company plans to expand its data center capacity across multiple campuses. Year-to-date, APLD stock has risen by 9.41%, currently priced at $7.61 per share.
Analysts project a target price of $10.71 for APLD, indicating potential growth beyond its current value.
2. Innodata
Innodata offers sophisticated analytics and data curation services to companies across various sectors, including e-commerce, finance, healthcare, and publishing. The company transforms raw data into actionable insights and provides training data for large language models.
Since April, INOD stock has surged by 127% to $17.68 per share. Innodata is set to report its Q3 2024 earnings on November 7th, following a strong performance in the previous quarter with a 66% revenue growth year-over-year.
Analysts predict that INOD stock could reach $34, surpassing its current value.
3. POET Tech
POET Technologies focuses on developing photonic integrated circuits (PICs) to enhance data transmission efficiency while reducing energy consumption. By utilizing photons instead of electrons, POET aims to revolutionize data transmission technology.
Despite reporting a net loss of $7.9 million in Q2 2023, POET stock has seen a significant year-to-date increase of 330%, priced at $4 per share. With a projected growth rate of 20.47% for the emerging PIC sector, POET’s innovative solutions have the potential to drive further stock appreciation.
The average price target for POET is $3.5, indicating a potential correction in the stock price.
In conclusion, investing in small-cap AI stocks can offer significant growth opportunities, but it is essential to carefully assess the associated risks and conduct thorough research before making investment decisions. These three companies showcase the potential for innovation and advancement in the AI sector, making them worth considering for investors seeking exposure to high-growth opportunities.
—
Disclaimer: The information provided in this article does not constitute financial advice. Readers are advised to conduct their own research and consult with a financial advisor before making investment decisions.