AI stocks have been on a tear recently, with Nvidia (NASDAQ:NVDA) once again breaking records and crossing above $950 per share. However, as I’ve cautioned many times before, this is a stock that investors need to be very careful with at these levels. While I would not recommend shorting Nvidia, the company does face significant downside risk if the AI rally loses steam. At the same time, there is not a whole lot of upside potential left after the meteoric rise.
That’s not to say Nvidia couldn’t potentially climb even higher – $1,000 per share or more is certainly possible if the momentum continues carrying it upward. But purely chasing momentum gains above $950 would not be a smart move in my view. Instead, investors should look to more under-the-radar AI stocks that have significant organic growth potential in the coming quarters and years. Here are seven that could trounce Nvidia’s gains next year:
AI Stocks: GigaCloud Technology (GCT)
At first glance, GigaCloud Technology’s (NASDAQ:GCT) name may seem a bit misleading. That’s because this is not actually a cloud computing company at all. Instead, GCT operates a B2B marketplace connecting buyers and sellers of furniture and other large goods. The company also provides logistics intelligence services, which I believe puts it squarely in the AI sector as well. Moreover, furniture and related companies have seen significant downtrends in their businesses lately that could be poised for a breakout rebound in the coming months.
GCT’s recent results have been stellar. The company has increased its revenue by 95% to $245 million and net income rose by 185% to $35.6 million. Looking ahead, revenue is expected to rise above $1 billion in 2024 alongside 50% year-over-year growth. Earnings per share should hit $2.6 this year. EPS is then forecasted to reach $4.2 in 2026, alongside revenue hitting $1.6 billion. In exchange for this tremendous growth, you’re paying just 11 times forward earnings and 1 times forward sales – extremely cheap valuations for a high-growth software company. I don’t believe the $402 million debt load changes this thesis either, as GCT generates significant cash flow and has $243 million in cash to help offset it.
Since I first covered this stock in an article last year, the share price has more than doubled. The recent correction looks to me like a prime entry point for the next leg up in this exciting AI play. While not yet a household name, GigaCloud Technology has all the ingredients for huge returns if execution remains strong.
Upstart (UPST)
Upstart’s (NASDAQ:UPST) stock price was up nearly 400% at one point since I first touted the AI lending platform back in early 2023. While the stock has given back some gains and is now up around 100% since then, I stand by my initial bullish call. I continue to believe Upstart can climb much higher over the long term.
Most of Upstart’s challenges lately stem from banks facing pressures and taking fewer risks. With economic uncertainty high, banks are hesitant to try new technologies like Upstart’s platform. Moreover, consumers have delayed major purchases for the past two years amid rising rates, and cratering demand for loans. However, I expect the tide to turn as the Fed pivots to rate cuts, spurring more borrowing activity. This should significantly benefit Upstart as banks again need credit risk capabilities.
Looking out, I see revenue potentially topping $1 billion in 2026, alongside expanding profitability. EPS could hit $1 that year, and some analysts estimate as high as $1.26. If achieved, that kind of income growth at reasonable valuations would send the stock soaring. While the path may be bumpy depending on the economy, I remain confident in Upstart’s innovative AI over the long run.
AI Stocks: T Stamp (IDAI)
T Stamp (NASDAQ:IDAI) is one of the more smaller AI stocks, with its modest size allowing for potentially huge returns if the business takes off. IDAI provides identity authentication software solutions using AI-powered biometrics, cryptography, and data mining. Their tech aims to predict identity/trustworthiness, prevent fraudulent attacks, and protect sensitive user data.
Coverage and forecasts on IDAI are limited given its nano-cap status. However, I view the stock as a worthwhile gamble at around 90 cents per share after falling close to its July 2023 floor price. Revenue grew 127% year-over-year to $3 million last quarter. Its market cap sits at just $8.3 million currently. My biggest worry is the cash burn, likely requiring some dilution before reaching profitability. But if IDAI gains traction, the upside in this cybersecurity play could be enormous.
AmpliTech Group (AMPG)
AmpliTech Group, Inc. (NASDAQ:AMPG) is a technology company designing, engineering, and assembling microwave component-based amplifiers. Their products include radio frequency (RF) amplifiers and related subsystems used in communication systems like Wi-Fi, radar, satellite, and cell phones.
This is not directly an “AI” firm, but AMPG does employ AI in many operations, as most companies do today. What matters is they are in high-tech sectors with solid growth runways. However, stellar financials are lacking currently. Revenue is expected to dive to $15.6 million in 2023 from over $19.4 million in 2022, alongside expected reversion to unprofitability.
So why do I view AMPG as a promising buy? The future looks bright. The company should deliver triple-digit growth in 2024, propelling revenue to $32 million and EPS back into positive terrain. The 2024 revenue estimate puts the stock at a mere 0.6 times sales, very inexpensive. I believe this could catalyze a breakout above $2. If execution goes smoothly, 2024 could mark the start of a high-growth, profitable period for AMPG.
AI Stocks: Klaviyo (KVYO)
Klaviyo (NYSE:KVYO) is a marketing automation platform used by over 143,000 companies globally. It helps businesses to activate customer data in real-time for things like targeted email, SMS, mobile push, and reviews.
Naturally, this is a much larger company. Firms engaging in marketing, customer relations, and related software often trade at steep premiums, and KVYO is no exception. However, I still see upside if it meets estimates. Analysts anticipate EPS climbing from 45 cents to 73 cents from 2024 to 2026 alongside revenue surging from $893 million to $1.5 billion from 2024 to 2027. Though expensive at 57 times forward earnings, this seems reasonable given the immense growth.
What makes me bullish are Q3 and Q4 EPS surprises of 78.5% and 15%, plus revenue surprises of 5.2% and 2.8%. If KVYO keeps posting major surprises, multibagger gains could come in 2-3 years. The future looks bright if execution remains best-in-class.
Symbotic (SYM)
Symbotic Inc. (NASDAQ:SYM) is an automation technology firm focused on boosting operating efficiencies in modern warehouses and supply chains. As I’ve articulated before, the current AI revolution is concentrated on white-collar industries but will likely spill into blue-collar domains. Repetitive tasks like factory work can easily be automated with sufficient machine learning. Human ingenuity is needed for jobs like plumbing, but warehouses can easily be automated.
Symbotic helps companies automate warehouses with its software, fitting squarely into this trend. The stock trades at a towering premium – 26 times book value. However, this seems reasonable given the market is thinking ahead. EPS is projected to surge from 18 cents in 2024 to 87 cents in 2026, alongside revenue growth from $1.74 billion to $3.5 billion. I believe an even higher premium is warranted long-term. Revenue could potentially eclipse $15 billion in the next eight years as automation adoption accelerates, with substantial EPS expansion too.
Lumine Group (LMGIF)
Lumine Group (OTCMKTS:LMGIF) spun out from Constellation Group (OTCMKTS:CNSWF) last year, focuses on communications and media software. It actively incorporates artificial intelligence into offerings, acquiring Neural Technologies in 2021 to enhance its AI offerings. This explains the strong stock momentum – nearly 130% gains since the spin-off.
LMGIF is a technology company with immense growth runways. The future 3-5-year average annual revenue growth estimate sits near 50%. Notably, LMGIF is not as unprofitable as it seems. The huge 2023 net loss decline mainly resulted from a $2.8 billion increase in the fair value of redeemable preferred and special securities. Analysts expect substantial profit growth in coming years as top-line expansion surges.
If LMGIF can continue executing on its AI-driven product roadmap, I see plenty of upside ahead. The company operates in a massive addressable market and is poised to capture share if it can sustain rapid product innovation. The growth trajectory looks highly promising at the moment.
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.
