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10 Small-Cap AI Stocks

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·12 min read
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In this article, we will take a look at the 10 best small-cap AI stocks. You can skip our comprehensive analysis and outlook of the artificial intelligence industry and go directly to the 5 Small-Cap AI Stocks.

The pandemic-driven recession harmed big and small businesses across all industries in terms of revenue and growth, but it only accelerated the usage of artificial intelligence. AI-powered businesses stayed afloat amidst the surge of COVID-19 as companies adopted robots in the hotel industry while the manufacturing and industrial segments implemented AI automation. Artificial intelligence is a vital invention that isn't going away anytime soon, as smart devices, enterprise software, data analytics, and algorithms play a significant role not just in fighting a global outbreak, but also in helping us prepare for other economic and health issues that may arise in the future.

According to the latest data from the International Data Corporation (IDC) Worldwide Semiannual Artificial Intelligence Tracker, global revenues for the artificial intelligence (AI) market, including software, hardware, and services, are expected to grow 16.4% year over year to $327.5 billion in 2021. As artificial intelligence gain more traction in 2021, many investors are looking for the next most promising AI company to invest in such as Microsoft Corporation (NASDAQ: MSFT).

Undoubtedly, tech behemoth Microsoft Corporation (NASDAQ: MSFT) is one of the biggest AI players in the world. The Washington-based tech company offers Microsoft AI Platform, a powerful platform for creating AI solutions in conversational AI, deep learning, data sciences, automation, and IoT. Microsoft Corporation (NASDAQ: MSFT) also introduced Azure Applied AI Services, a set of cloud-based AI services that improve and speed up business processes including document processing and data extraction. In the third quarter of 2021, Microsoft Corporation (NASDAQ: MSFT) posted revenue of $41.7 billion and net income of $15.5 billion. Shares of MSFT increased 35% over the past twelve months.

In December, the market witnessed one of the hottest IPOs of 2020 with the launch of Microsoft-backed AI software firm C3.ai, Inc. (NYSE: AI). On Dec. 8, the California-based enterprise artificial intelligence company priced its initial public offering at $42 per share. C3.ai, Inc. (NYSE: AI) offers software as a service (SaaS) that supports the application of enterprise-scale AI solutions in commercial, industrial, financial, and government sectors. Among the biggest companies that utilize the company's AI services are Raytheon Technologies Corporation (NYSE: RTX), Royal Dutch Shell plc (NYSE: RDS-A), 3M Company (NYSE: MMM), and Baker Hughes Company (NYSE: BKR). The company's revenue in the third quarter of 2021 came in at $49.1 million, up 19% from $41.2 million in the third quarter of 2020. Shares of AI climbed 17% in the last month.

Innodata Inc. (NASDAQ: INOD) is one of the small-cap AI stocks that drives the growth of rising tech and innovations. The New Jersey-based company was founded in 1988. Data engineering specialists such as Innodata Inc. provide technology, consulting services, and business processes. By utilizing artificial intelligence and machine learning, the company solves a wide range of data challenges. Aside from this, Innodata Inc. (NASDAQ: INOD) helps clients with digital data distribution for marketing and public relations. Finally, the AI firm provides an intelligent data platform that uses its data models or client data models to convert medical records into usable digital data. Some of the company's biggest clients are business and financial firm Bloomberg and tech giant Apple Inc. (NASDAQ: AAPL). In the first quarter of 2021, total sales were $16 million, up 4% from $15.3 million in the fourth quarter of 2020. Shares of INOD surged 357% over the past twelve months.

NETGEAR, Inc. (NASDAQ: NTGR)

A cognitive smart home is based on the application of automation and artificial intelligence. NETGEAR, Inc. (NASDAQ: NTGR) is a California-based technology company that creates cutting-edge networking technologies that link individuals and fuel companies. Among the products NETGEAR, Inc. offers are whole-home mesh WiFi, switches, powerline, business routers, and network storage. NETGEAR, Inc.'s (NASDAQ: NTGR) revenue in the first quarter of 2021 increased by 38.3% to $317.9 million, up from $230 million in the first quarter of 2020. Strong demand for Wi-Fi 6 products was the primary driver of revenue growth. In the first quarter, the company shipped roughly 4.1 million systems, including 2.7 million wireless nodes. Shares of NTGR jumped 52% over the past twelve months.

The AI revolution is a telltale sign of the changes taking place in the world. These changes are also affecting the hedge fund industry. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th, 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Small-Cap AI Stocks
Small-Cap AI Stocks

Photo by lucas law on Unsplash

With this context in mind, here is our list of the 10 small-cap AI stocks.

Best Small-Cap AI Stocks

10. Innodata Inc. (NASDAQ: INOD)

Number of Hedge Fund Holders: 4

Innodata Inc. (NASDAQ: INOD) is a New Jersey-based data engineering firm that was founded in 1988. It is placed 10th on our list of 10 small-cap AI stocks. The company resolves data challenges using machine learning and artificial intelligence. In addition, Innodata Inc. helps a variety of businesses in digital data distribution, medical record data extraction, and document analytics. Among the company's biggest clients are business and financial firm Bloomberg and tech giant Apple Inc. (NASDAQ: AAPL).

The company has a market cap of $167 million. In the first quarter of 2021, the company's total sales were $16 million, up 4% from $15.3 million in the fourth quarter of 2020. Innodata Inc. (NASDAQ: INOD) inked an amendment to its contract in March, agreeing to offer up to $7.0 million in AI services in 2021 to one of the world's largest social media sites. The 52-week price range of Innodata Inc (NASDAQ: INOD) is $0.98 - $9.49. Shares of INOD surged 357% over the past twelve months.

At the end of the first quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $7.2 million in Innodata Inc. (NASDAQ: INOD).

9. Alithya Group Inc. (NASDAQ: ALYA)

Number of Hedge Fund Holders: 4

Alithya Group Inc. (NASDAQ: ALYA) is a Montreal-based IT consulting company that was founded in 1992. It is placed ninth on our list of 10 small-cap AI stocks. Alithya Group Inc. primarily develops AI solutions to help businesses solve enterprise problems. The company offers business management consulting and enterprise solutions such as ERP and CRM. Alithya Group Inc. also provides application services such as digital application creation, software engineering, IT management, and cloud and network infrastructure monitoring and upgrade.

The company has a market cap of $210 million. Third-quarter revenue came in at $70.6 million, up from $66.2 million in the same period in 2019. In March, Alithya Group Inc. acquired Montreal-based digital solutions firm R3D Conseil Inc. for approximately $76 million. In addition, the company gained a $10.3 million information resources project management contract with a Québec government ministry in June. The 52-week price range of Alithya Group Inc. (NASDAQ: ALYA) is $1.45 - $5.47. Shares of ALYA increased 32% over the past twelve months.

At the end of the first quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $10.9 million in Alithya Group Inc. (NASDAQ: ALYA). Out of the hedge funds being tracked by Insider Monkey, Cleveland-based Ancora Advisors is a leading shareholder in Alithya Group Inc., with 2.78 million shares worth more than $6.7 million.

8. Magic Software Enterprises Ltd. (NASDAQ: MGIC)

Number of Hedge Fund Holders: 5

Magic Software Enterprises Ltd. (NASDAQ: MGIC) is an Israel-based software development company that was founded in 1983. It is placed eighth on our list of 10 small-cap AI stocks. The software firm creates cutting-edge software platforms for enterprise integration and the development of business apps. With over 30 years of experience, Magic Software Enterprises Ltd. has built strategic collaborations with global IT leaders such as Microsoft (NASDAQ: MSFT), salesforce.com, inc. (NYSE: CRM), and SAP SE (NYSE: SAP).

The company has a market cap of $784 million. The company's revenue in the first quarter of 2021 increased 25.9% to $107.3 million, up from $85.2 million in the same quarter in 2020. For FY 2021, the company raised its revenue projection to $425 to $435 million, up from $420 to $430 million previously, showing annual growth of 13.5% to 17.2%. Shares of MGIC climbed 51% over the past twelve months. In March 2021, investment bank HC Wainwright & Co. analysts maintained a Buy rating for Magic Software Enterprises Ltd. with a price target of $20 per share. The 52-week price range of Magic Software Enterprises Ltd. (NASDAQ: MGIC) is $10.67 - $18.35.

At the end of the first quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $17.8 million in Magic Software Enterprises Ltd. (NASDAQ: MGIC).

Like Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), NETGEAR, Inc. (NASDAQ: NTGR), Raytheon Technologies Corporation (NYSE: RTX), Royal Dutch Shell plc (NYSE: RDS-A), 3M Company (NYSE: MMM), and Baker Hughes Company (NYSE: BKR), Magic Software is set to gain from the AI revolution.

7. CooTek (Cayman) Inc. (NYSE: CTK)

Number of Hedge Fund Holders: 5

CooTek (Cayman) Inc. (NYSE: CTK) is a Shanghai-based mobile app developer that was founded in 2008. It is placed seventh on our list of 10 small-cap AI stocks. The Chinese tech firm is a rapidly expanding mobile internet firm that creates mobile apps and artificial intelligence software. One of CooTek's flagship mobile app products is the TouchPal Smart Input keyboard, with over 154.6 million monthly active users. While the company's portfolio products have 58.6 million monthly active users.

The company has a market cap of $133 million. First-quarter net revenue came in at $81.6 million. Cash, cash equivalents, and restricted cash were $56.1 million as of March 31, 2021, up from $49.6 million as of December 31, 2020. CooTek (Cayman) Inc. expects total net revenue to be around US$83 million in the second quarter of 2021. The 52-week price range of CooTek (Cayman) Inc. (NYSE: CTK) is $1.75 - $7.25.

At the end of the first quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $2.7 million in CooTek (Cayman) Inc. (NYSE: CTK), up from 2 the preceding quarter worth $226,000.

Like Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), NETGEAR, Inc. (NASDAQ: NTGR), Raytheon Technologies Corporation (NYSE: RTX), Royal Dutch Shell plc (NYSE: RDS-A), 3M Company (NYSE: MMM), and Baker Hughes Company (NYSE: BKR), CTK is set to gain from the AI revolution.

6. Ideanomics, Inc. (NASDAQ: IDEX)

Number of Hedge Fund Holders: 7

Ideanomics, Inc. (NASDAQ: IDEX) is a New York-based fintech company that promotes the adoption of commercial electric vehicles and was founded in 2004. It is placed sixth on our list of 10 small-cap AI stocks. The fintech company offers EVs and motorbikes to charging infrastructure and EV farming items like tractors. As Ideanomics, Inc. (NASDAQ: IDEX announced an acquisition arrangement with U.S. Hybrid, a business that develops and provides fuel cells, drive trains, and other components for zero-emission autos, Reddit traders have been more interested in the small-cap AI stock.

Ideanomics, Inc. (NASDAQ: IDEX has a market cap of $1.2 billion. The company's revenue in the first quarter of 2021 came in at $32.7 million, up from $378,000 in the first quarter of 2020. The AI penny stock presently has a Buy recommendation from Roth, which set a $7 price target for it in April 2021. The 52-week price range of Ideanomics, Inc. (NASDAQ: IDEX) is $0.55 - $5.53. As of June 4, the stock closed at $2.86 a share. Shares of IDEX stock have climbed by more than 745% over the past twelve months.

At the end of the first quarter of 2021, 7 hedge funds in the database of Insider Monkey held stakes worth $20.8 million in Ideanomics, Inc. (NASDAQ: IDEX), up from 5 the preceding quarter worth $3.41 million.

Like Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), NETGEAR, Inc. (NASDAQ: NTGR), Raytheon Technologies Corporation (NYSE: RTX), Royal Dutch Shell plc (NYSE: RDS-A), 3M Company (NYSE: MMM), and Baker Hughes Company (NYSE: BKR), IDEX is set to gain from the AI revolution.

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Disclosure: None. 10 Small-Cap AI Stocks is originally published on Insider Monkey.