Artificial intelligence (AI) used to be a concept that was strictly reserved for Hollywood movies. Now, AI is infiltrating virtually every major industry and is considered to be one of the most important technologies of the 21st century. But are there any small-cap AI stocks out there worth adding to your portfolio?
While the AI space is seemingly dominated by industry giants like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), IBM (NYSE:IBM), and NVIDIA (NASDAQ:NVDA), small-cap AI stocks are necessary for innovation and are often more daring, flexible, and quicker at developing new products than established companies are.
In fact, a lot of the most promising AI stocks are startup companies that are exploring applications that haven’t been considered yet.
Of course, small-caps are inherently riskier investments, which is why investors should look for companies that are more than just smoke and mirrors.
Here are some of the top small-cap AI stocks that we think could be ones to watch in the coming year.
AI Stocks to Watch: Catasys Inc.
Healthcare industry tech leader Catasys Inc. (NASDAQ:CATS) is one small-cap AI stock with a lot of potential. The company provides Big Data predictive analytics, telehealth, and AI to health plans and third-party payors and offers its OnTrak solution to improve treatment outcomes and lower medical and behavioral health plan service utilization.
In Q3, the California-based company reported record revenue of $8.8 million, which represents a 102% increase year-over-year and 15% from the second quarter.
It’s no surprise that Catasys has received a consistent “buy” rating from three Wall Street analysts over the last six months and has been handed an average 12-month price target of $21.00 USD, which suggests the stock is trading at an 18% discount.
Moving forward, analysts expect Catasys to bring in $88.6 million next year, which would reflect a whopping 206% increase in sales compared to 2019.
By the end of day Thursday, CATS stock was down 0.58% at $17.19 USD. However, the company is up 82.87% since the beginning of the year and is expected to continue upward.
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AI Stocks to Watch: CEVA Inc.
CEVA Inc. (NASDAQ:CEVA) is the leading licensor of smart sensing technologies, providing digital signal processors, AI processors, and wireless platforms to semiconductor companies and original equipment manufacturers (OEMs) that serve the mobile, consumer, automotive, and Internet of Things (IoT) markets.
The company’s signal processing intellectual properties (IPs) include platforms for 5G baseband processing, integrated cellular IoT solutions, digital signal processing platforms that incorporate voice input algorithms and software for voice-enabled devices, DSP platforms for advanced imaging and computer vision, as well as IPs for WIFI and Bluetooth platforms.
In short, CEVA is a force to be reckoned with in the digital tech space and is one of the top small-cap AI stocks to watch.
In 2019, 10 billion CEVA-powered devices were shipped worldwide, leading to strong financial results for the company throughout the year. Hedge funds and institutional investors have also continued to increase their stake in the company.
What’s more, the expected breakout of 5G technology in the next year will possibly propel CEVA stock higher.
By end of day Thursday, CEVA stock was up 1.71% at $26.83 USD. The company’s share price is up nearly 18% this year, but analysts expect it to gain even more traction and surpass $31.00 USD.
AI Stocks to Watch: Sonos Inc.
Another small-cap AI stock that is poised for a great year is consumer electronics company Sonos Inc. (NASDAQ:SONO). Best known for its wireless speakers and multi-room wireless home sound systems, Sonos recently announced its plan to acquire voice-assistant startup Snips to bring its customer experience to the next level.
According to Sonos CEO Patrick Spence, the company isn’t looking to compete with Google Home or Alexa, but want to build something music-focused to provide a “differentiated and immersive experience for customers.”
The recent acquisition has caught the attention of both analysts and institutional investors and could, in turn, make the company a very intriguing acquisition target for industry giants like Apple Inc. (NASDAQ:AAPL). The eight rating firms covering Sonos have handed the company a consensus “buy” rating and an average 12-month price target of $17 USD, meaning its current $13.86 share price is trading at an 18.47% discount.
Sonos also released very positive Q3 2019 results, demonstrating another year of strong revenue growth. The company sold 6.1 million speakers and accessories in 2019 and added 1.7 million new households to its customer base.
Since the start of 2019, SONO stock has increased by 28.93%, and if predictions are correct, it will continue upwards indefinitely.
Are there any small-cap AI stocks on your radar? Let us know about them in the comments!
Featured Image: DepositPhotos © VitalikRadko
