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Nvidia (Nasdaq: NVDA), Advanced Micro Devices (Nasdaq: AMD), Microsoft (Nasdaq: MSFT), Meta Platforms (Nasdaq: META), Amazon (Nasdaq: AMZN), and Alphabet (Nasdaq: GOOGL) have become household names when it comes to large-cap AI stocks.But small-cap AI stocks represent a greater high-growth potential despite the higher risk. Their lower market caps also make for extra volatility. That is a good baseline for rapid price spikes and sharp declines for a buy opportunity.Here are some of the promising small-cap AI stocks investors should consider.
Applied Digital Corp (Nasdaq: APLD)
Formerly known as Applied Blockchain, the company took the mantle of Applied Digital in 2021. This marked the shift from data centers for cryptocurrency mining/hosting to AI. Across North America, Applied Digital hosts high-performance (HPC) computing clusters to support generative AI products.Most recently in early September, Applied Digital secured $160 million worth of private financing, led by institutional investors alongside Nvidia and Related Companies. The latter is a NYC-based real estate firm that also extends its commercial properties to data center infrastructure.Under the umbrella of NVIDIA Partner Network (NPN), Applied Digital gained “Elite Partner” status in August 2023. In October, the company delivered its fiscal Q1 2025 earnings ending August, which showed an impressive 67% revenue increase year-over-year to $60.7 million.This still delivered a net loss of $4.2 million as Applied Digital’s data center investments in equipment are yet to be utilized to full extent and return invested capital. Presently, the company operates six data server clusters, with each powered by 1,024 GPUs.Across Ellendale campus and three more campuses, Applied Digital plans to quadruple its data center capacity up to 1.4 GW in the coming years. Year-to-date, APLD stock is up 9.41%, currently priced at $7.61 against the 52-week average of $5.01 per share.According to 7 analyst inputs collected by Nasdaq, the average APLD price target is $10.71, while even the bottom target of $9 is above the present price level.
Innodata Inc. (Nasdaq: INOD)
Since Innodata coverage in April, INOD stock is up from $6.46 to the present price of $17.68 per share, representing a 127% year-to-date valuation boost. Covering e-commerce, finance, healthcare, publishing and other sectors, Innodata gives companies sophisticated analytics and data curation so they can arrive at actionable decisions.In other words, Innodata is all about transforming raw client data into useful data. This includes the training data for large language models (LLMs), so they can serve as effective AI agents. Case in point, Innodata was contracted by three large companies in October 2023 to fine-tune their legal and medical LLMs, in addition to building LLM as proof-of-concept.Innodata is scheduled to report its Q3 2024 earnings on November 7th. In the last Q2 period, the company reported 66% year-over-year revenue growth to $32.6 million. Six months ending June, Innodata generated $981k net income, a significant improvement over $2.9 million net loss in the H1 2023 period. Still under the 52-week high of $21.58 per share, INOD stock is projected to reach $34 as the median per WSJ forecasting data.
POET Technologies Inc. (Nasdaq: POET)
It is becoming increasingly clear that all nations aiming to win the AI race will have to significantly ramp up their energy generation and data transmission investments. But there is also much room in improving efficiency. This is where POET comes in with its innovative photonic integrated circuits (PICs).In concert with Ontario Tech University, the company began developing PICs as a way to boost data transmission while drastically reducing energy consumption. This is accomplished by relying on photons instead of traditional electrons, as the latter are slower than the speed of light.Case in point, POET Optical Interposer is a hybrid platform that integrates electronic and photonic devices into a single multi-chip module. According to Mordor Intelligence forecast, this emerging sector is projected to grow at a CAGR of 20.47% between 2024 to 2029. More about POET’s role in this market can be viewed in July’s Pure Play AI Datacom Hardware presentation. Given considerable R&D expenses, in Q2 2023 the company reported $7.9 million net loss compared to $4.4 million net loss in the year-ago quarter. This is a sign for investors to take POET stock as a risky exposure to a pioneering endeavor, similar to space stocks. Presently priced at $4 per share, POET stock is up 330% year-to-date. The average POET price target is $3.5, which means investors should probably wait for a price correction.More By This Author:American Express Reports Third Quarter Results With $3.49 EPS, $16.6 B In Revenue
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