Despite overboughtness concerns, Nvidia (NASDAQ: NVDA) has been rising this year between dips. While down 11% over the last 30 days, NVDA shares have given nearly 70% returns year-to-date, greatly outpacing the broad market benchmark S&P 500 (SPX), which is at 7% for the same period.
The fact that NVDA fluctuates with multi-billion swings but then recovers points to one theme. Investors see AI infrastructure as a new gold rush, with Nvidia as the agile supplier and AMD (NASDAQ: AMD) encroaching slowly with the MI300 series of AI chips.
Just as Bitcoin took the spotlight amid thousands of cryptocurrencies, Nvidia became an AI stock. However, outside that focus lie opportunities in smaller-cap AI stocks, just as many altcoins outperformed Bitcoin.
Here are three promising companies contributing to the ongoing AI race.
Innodata Inc. (NASDAQ: INOD)
At the present price level of $6.46, INOD stock is close to its 52-week low point of $5.46 per share. After February’s peak at $11.63, INOD shares are down 19% year-to-date, suggesting a steep discount.
Innodata provides an important AI service. As large language model (LLM) training became commonplace, the New Jersey-based company provided the groundwork—sourcing, collecting, and creating high-quality data pools for AI models to use for generative output.
This foundational prep-work for generative AI includes image, audio, and video data pools. Thus, Innodata’s customers can rely on robust AI agents to automate various tasks.
Compared to a net loss of $11.9 million in 2022, Innodata reported a $908k net loss in 2023. At the same time, the company only slightly increased total liabilities from $29.9 million to $34.4 million. Overall, Innodata increased revenue from $79 million in 2022 to $87 million in 2023.
Given its penny stock status, investors should consider INOD as volatile, having rallied again 4.3% over the week.
SoundHound AI, Inc. (NASDAQ: SOUN)
From the early April coverage, SOUN shares were priced at $5.22, dipping to the present $4.34 per share. SoundHound’s YTD peak was at $8.91 mid-March, yielding a 103% YTD return to penny stock shareholders. Considering SOUN’s 52-week low is $5.46, the stock now presents another buy on the weakness opportunity.
SoundHound’s fundamentals remain the same for future growth. The Californian company specializes in making human speech recognizable and replicable. Its voice AI platform, Houndify, allows developers to build voice-activated apps. In turn, SoundHound gets a royalty cut. The same platform also generates recurrent subscription revenue for hosted services.
The bottom line is that SoundHound will likely find use in all service sectors as customer relations are automated. Although having reported 80% revenue growth in Q4 2023, or 47% year-over-year for full-year 2023, the AI startup is still non-profitable.
Nonetheless, SoundHound cut its net loss to $88.9 million from $116.7 million in 2022. In 2025, the company expects to see its first positive (adjusted) EBITDA. If that occurs, investors will likely see multiple gains from the present weak point. Twelve months ahead, Nasdaq’s data suggests an average SOUN price target of $7.15 vs. the current $4.34 per share.
Fastly, Inc. (NASDAQ: FSLY)
After the initial hype in the first half of the year, FSLY shares are down 28% YTD. At $12.64, FSLY stock is close to its 52-week low of $11.61 per share. Based in San Francisco, Fastly occupies a particular niche in the AI market.
In addition to optimizing images and videos, Fastly provides customers with edge cloud services. If cloud-hosted services are closer to end-users, there is less lag in data processing and delivery. As such, Fastly caters to clients of all sizes who need reliable web content delivery.
This is critical for computing-hungry generative AI apps. This subscription-based service also included the increasingly important bot and DDoS attack protection. In April, the company introduced Fastly Bot Management, offering granular tweaking so that “bad traffic” is blocked while “good traffic” is let in.
Fastly delivered full-year 2023 earnings in February, showing 17% year-over-year revenue growth to $506 million. Its net loss was significantly reduced from $190.8 million in 2022 to $133.1 million. For full-year 2024, Fastly expects total revenue’s increase to $580 – $590 million range.
Nasdaq’s data suggests an average FSLY price target of $18.67 vs. the current $12.64. The low estimate is higher than the present range, at $16 per share.
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Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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