15 Best Small Cap AI Stocks To Buy Right Now

15 Best Small Cap AI Stocks To Buy Right Now

  • 23.03.2025 00:51
  • insidermonkey.com
  • Keywords: AI

The article highlights 15 small-cap AI stocks offering potential growth opportunities due to lower costs and reduced competition. It suggests these companies could benefit from advancements in Chinese AI technology and favorable macroeconomic conditions, positioning them as second-wave beneficiaries in the AI market.

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Estimated market influence

DXC Technology Company

Positivesentiment_satisfied
Analyst rating: N/A

DXC Technology Company is a global provider of IT services and solutions, specializing in digital transformation, IT modernization, cloud computing, cybersecurity, analytics, and business process outsourcing. They are actively expanding their AI capabilities through partnerships with SAP and ServiceNow, and have successfully implemented AI solutions for clients like Singapore General Hospital and Ferrari.

C3.ai

C3.ai

Positivesentiment_satisfied
Analyst rating: N/A

C3.ai is an enterprise software company specializing in AI solutions. They provide the C3 AI Platform, which supports digital transformation and operational optimization across various industries. Their partnerships with Microsoft, AWS, and McKinsey QuantumBlack have significantly expanded their global distribution capacity.

Insight Enterprises

Positivesentiment_satisfied
Analyst rating: N/A

Insight Enterprises is a global technology solutions provider offering IT procurement, cloud and data center transformation, digital innovation, cybersecurity, and managed services. They are incorporating AI into their offerings, including AI-powered analytics, automation, and digital innovation services.

Context

Analysis and Summary: 15 Best Small Cap AI Stocks To Buy Right Now

Overview

  • The article highlights the potential investment opportunities in small-cap AI stocks, focusing on companies that could benefit from the second wave of AI-driven growth, following the initial boom experienced by larger tech giants.

Key Market Insights

1. Shift to Second-Wave AI Beneficiaries

  • Large-Cap Tech Companies: Dominated the first wave of AI investments in 2023–2024, focusing on GPU manufacturing and data center infrastructure.
  • Small-Cap Companies: Positioned as potential second-wave beneficiaries due to:
    • Lower costs of entry with advancements like generative AI.
    • Specialized AI products and applications across sectors (healthcare, finance, cybersecurity).
    • Undiscovered and undervalued status compared to Big Tech.

2. Macroeconomic Factors

  • Interest Rates: The Federal Reserve's interest rate policy may lead to lower rates in coming quarters, benefiting small-cap companies by reducing financing costs and supporting growth investments.
  • GDP Growth: Deteriorating GDP forecasts could increase the likelihood of interest rate cuts, further aiding small-cap valuations.

3. Technological Developments

  • Chinese AI Breakthrough: A Chinese startup, DeepSeek, claims to have developed an AI model comparable to U.S. models at a fraction of the cost, potentially disrupting the AI training and inferencing market.
  • Generative AI Traction: Companies like C3.ai are showing strong progress in generative AI pilots with major clients.

4. Market Dynamics

  • First-Wave Correction: Potential decline in demand for GPUs and semiconductor equipment as questions arise about excessive hardware investments.
  • Second-Wave Opportunities: Lower costs of AI development could enable hundreds of startups to enter the market, driving innovation and mass-market applications.

Company-Specific Insights

1. DXC Technology Company (NYSE:DXC)

  • Focus Areas: IT services, digital transformation, cloud computing, cybersecurity, analytics.
  • Performance:
    • Q3 revenue decline of 4.2% YoY on an organic basis.
    • Adjusted EBIT margin expanded by 140 basis points YoY to 8.9%.
    • Non-GAAP EPS growth of 7% YoY.
  • Strategic Partnerships: Collaborations with SAP and ServiceNow, successful AI implementations for clients like Singapore General Hospital and Ferrari.

2. C3.ai, Inc. (NYSE:AI)

  • Focus Areas: Enterprise AI solutions, digital transformation, predictive maintenance, and operational optimization.
  • Performance:
    • Q3 revenue of $98.8 million, up 26% YoY.
    • Subscription revenue growth of 22% YoY to $85.7 million.
  • Strategic Partnerships: Collaborations with Microsoft, AWS, and McKinsey QuantumBlack.
  • Generative AI Traction: 20 generative AI pilots closed with clients like Mars, Liberty Coca-Cola Beverages, and the U.S. Department of Defense.

3. Insight Enterprises, Inc. (NASDAQ:NSIT)

  • Focus Areas: IT procurement, cloud transformation, cybersecurity, and managed services.
  • Performance:
    • Q4 gross profit up 1%, driven by a 12% increase in core services.
    • Full-year 2024 gross profit of $8.7 billion with a 6% YoY increase.
  • Cloud Growth: Cloud gross profit grew 21% YoY to $484 million.

Strategic Considerations

1. Investment Opportunities

  • Small-cap AI stocks offer attractive entry points for investors seeking exposure to the next wave of AI innovation beyond Big Tech.
  • Companies with strong partnerships, generative AI capabilities, and proven financial performance are well-positioned for growth.

2. Risks and Challenges

  • Technological Uncertainty: Questions remain about the long-term viability of massive hardware investments in AI.
  • Global Uncertainties: Trade policies, geopolitical conflicts, and inflation could pressure corporate spending on AI-related projects.

3. Long-Term Effects

  • Lower interest rates and reduced AI development costs could accelerate innovation and market adoption across industries.
  • The rise of cost-effective AI solutions may disrupt traditional markets and create new opportunities for smaller players.

Conclusion

The article underscores the potential for small-cap AI stocks to outperform in the coming quarters, driven by:

  • Technological Breakthroughs: Lower-cost AI development and generative AI advancements.
  • Macroeconomic Factors: Favorable interest rate conditions supporting small-cap growth.
  • Market Dynamics: Shift from first-wave hardware investments to second-wave software and application innovations.

Investors are encouraged to focus on companies with strong financial performance, strategic partnerships, and a clear path to market disruption in the AI space.