Many of us dream of getting in early on the next big thing, such as a groundbreaking company that goes on to deliver jaw-dropping returns to early investors. Artificial intelligence feels like one of those once-in-a-generation opportunities. AI has already transformed industries from healthcare to transportation, and its potential seems limitless.
The problem? AI stocks have been taking off like rockets lately, with share prices soaring to sky-high valuations. Buying now may prompt feelings of FOMO (fear of missing out) for current investors. Indeed, while I love the long-term potential of this space, I’m not thrilled about buying these frothy, overhyped stocks at current levels.
AI penny stocks offer much more explosive upside in the near-term. Yes, penny stocks are notoriously risky, with huge price swings commonplace. And many will turn out to be total duds. But if you pick the right ones early and have the stomach for volatility, massive returns are possible. Here are seven to look into.
Aware (AWRE)
Aware (NASDAQ:AWRE) uses artificial intelligence to identify people, with applications that could prove invaluable for law enforcement and government agencies. Judging by its latest financials, Aware seems to be hitting its stride.
In Q3 2023, Aware delivered triple-digit sales growth. Revenues soared 111% to $6.4 million compared to the same quarter last year. Profitability remains slim, which is typical for a small-cap tech stock. But what impresses me most is that Aware isn’t hemorrhaging cash, a rarity among SaaS startups.
Recent contract wins validate my conviction that Aware is one of the best AI penny stocks. The company secured a $3.4 million contract that, including annual maintenance options, has a 5-year value of up to $5.1 million. This expands Aware’s footprint with the U.S. government. Aware also began recognizing revenue from the 5-year, $5 million contract it landed last quarter with its largest biometric services customer.
Management pointed out that both contracts reflect the trust leading government agencies place in Aware, and when combined with the new AwareABIS, contracts are expected to contribute more than $1.5 million to the company’s annual recurring revenue.
With more government agencies and departments added to its client roster, I believe Aware’s revenues could march significantly higher over the long-term. Biometrics represents a critical growth arena as digital ID becomes universal. Aware looks well-positioned to capitalize on this trend as a pioneer in the space.
Rec Silicon (RNWEF)
Rec Silicon (OTCMKTS:RNWEF) produces and sells silicon materials used in solar panels and semiconductors worldwide. The company’s main products are silicon materials sold to manufacturers of solar wafers and chips. I’m bullish on Rec Silicon’s growth drivers and upside potential.
Analysts forecast 150%+ revenue growth for Rec Silicon in 2024. Consensus estimates call for $351 million in sales this year, up sharply from $141 million in 2023. Additionally, revenue is projected to reach $606 million by 2026 as demand for solar energy booms.
Meanwhile, Rec Silicon is evolving its business mix. The company is discontinuing its EG polysilicon production in 2024 while optimizing its Butte production. Since silane gas is Rec Silicon’s largest product line, reallocating resources to maximize silane output over the long-term seems like a smart strategic move.
Between surging market demand, streamlining its production, and silane capacity expansion, Rec Silicon has multiple avenues for top-line growth. Its prospects appear bright as the solar industry’s future shines.
Expert.ai (EXSPF)
Expert.AI (OTCMKTS:EXSPF) offers a hybrid artificial intelligence platform that transforms text into actionable knowledge and insights. The technology provides a deep natural language understanding of complex documents, social media, and other unstructured text sources. Expert.ai combines machine learning, knowledge representation, and large language models to generate high-quality, explainable results.
With capabilities like intelligent document processing, domain-specific language modeling, and custom natural language solutions, Expert.AI taps into immense market demand for data analytics. As an AI innovator, I believe Expert.AI is attractively positioned to win major enterprise contracts.
Validating my bullish thesis, EXSPF stock has nearly doubled over the past year. Shares are up 97%, signaling that the company is executing well and the market sees its potential.
Data Storage Corp (DTST)
Data Storage Corp (NASDAQ:DTST) has been on my radar for a while, and my conviction recently paid off handsomely! Even with shares breaking a bit above $5 per share, I firmly believe the party is just getting started for this under-the-radar gem. The company’s small market cap still makes it count as a penny stock in my eyes.
Sure, at first glance Data Storage may seem a bit pricey based on traditional valuation metrics. But when you consider the company’s trajectory and future potential, that premium looks like a bargain. Data Storage still trades at a significant discount to industry leaders, leaving ample room for growth in the coming months.
We’re already seeing early signs of a hypergrowth inflection point, with Q3 revenue surging 35.5% year-over-year. Notably, the company’s revenue came in nearly 20% above Wall Street’s expectations! Data Storage’s CloudFirst business alone generated $3.7 million for the quarter, with net income over $800,000 and EBITDA exceeding $1.1 million. For a business still off most investors’ radar, these are impressive figures.
With metrics like these, I believe it’s only a matter of time before Wall Street takes notice and sends DTST stock to new highs. The company provides critical business continuity services, including disaster recovery, infrastructure-as-a-service, and cybersecurity offerings. Demand for these solutions will only grow as data security becomes more paramount.
CloudFirst was merged with Flagship Solutions Group recently for more efficiency. As both a value and growth play, I’m very bullish on DTST stock as a long-term hold with multi-bagger potential. If the stars align, this can become one of the best AI penny stocks in the market moving forward.
Adcore (ADCOF)
As digital transformation accelerates globally, search engine optimization is becoming increasingly vital for businesses seeking visibility online. That’s why I’m bullish on Adcore (OTCMKTS:ADCOF), a leading advertising technology platform automating day-to-day SEO tasks. I think it is one of the top AI penny stocks in its sector.
Even offline companies require an online presence nowadays. SEO can make or break that presence, determining search rankings and web traffic. Adcore provides automated solutions for search marketing, though it remains a small player in this vast industry.
After plummeting more than 90% from its peak, ADCOF stock has traded sideways around 17-20 cents for two years now. But with rock-solid execution lately, I believe a major breakout to the upside could be close.
Adcore generated net losses of just $140,000 in Q3 2023, with revenue up 11.5% to $6.1 million. As growth and profitability improve, this microcap stock could potentially deliver outsized returns. Adcore still has immense room to run before reaching its full recovery.
I’m very optimistic that Adcore’s automated search marketing solutions position it for sustainable growth in the years ahead. This remains a speculative play, but the risk-reward profile looks highly compelling for this stock at current levels.
Investview (INVU)
As a fintech and financial education company increasingly incorporating AI, Investview (OTCMKTS:INVU) has my attention. The company assists self-directed investors in various markets including stocks, options, forex, and crypto.
Despite trading around just 1-2 cents for the past two years, I believe INVU could climb significantly higher with solid execution. It’s still early innings for this micro-cap stock.
Revenue grew 28% year-over-year in Q3 2023 to $19.2 million. Investview is on pace for around $65-75 million in total 2023 revenue, far above its $38 million market cap today. Even better, the company has been profitable for three straight quarters – a rarity among early-stage SaaS players.
By combining digital financial education and AI-enhanced advisory services, Investview hits a market sweet spot. Its focus on self-directed investors also provides an immense total addressable market opportunity.
At current valuation levels, I think Investview offers compelling risk/reward. If the company sustains its growth trajectory and profitability, the upside from here could prove tremendous. This is a speculative micro-cap play worth monitoring closely.
EML Payments (EMCHF)
EML Payments (OTCMKTS:EMCHF) is a fintech infrastructure company enabling real-time payments and prepaid cards. While not directly involved in AI, EML does leverage AI and machine learning for its personal finance management tools.
After stumbling in recent years, EMCHF stock is making an impressive comeback. Shares have surged around 130% over the past 12 months to nearly 70 cents today. This aligns with strengthening financials and a return to growth.
Additionally, the company’s revenue increased 30% year-over-year in Q4, with profitability potentially on the horizon. As business momentum builds, I’m optimistic that EML can sustain its resurgence.
The total addressable market also appears vast for EML’s payment and card solutions. With innovation and effective execution, significant growth upside likely remains. There is substantial room left for the company to recover to former highs.
Penny Stocks
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.