Following the meteoric rise of AI stocks in 2023, investors are searching for the next big winners in this space. While the leaders from last year may continue to appreciate, their days of 10x returns are likely behind them. Thus, for those in pursuit of life-changing wealth, we must look to the upstarts. You know, those little-known companies on the cutting edge of AI innovation.
I’ll share three AI penny stock picks that I believe have the potential to deliver outsized returns in 2024. These are early-stage startups with groundbreaking technology that could disrupt various industries. Of course, with higher reward potential comes higher risk. These stocks are volatile, so it’s important for investors to size positions accordingly.
Recent breakthroughs like Sora’s new text-to-video generator are creating tremendous excitement around AI. As hype builds in the coming months, I expect investor interest in this space to lift many related boats. Let’s take a look at three top penny stock ideas in the AI world!
Data Storage Corp (DTST)
Data Storage Corp (NASDAQ:DTST) is an overlooked option for investors seeking exposure to the AI boom. With data generation exploding and models growing more advanced, demand for data storage and analytics looks poised to continue growing at an impressive clip.
In the third quarter, Data Storage delivered revenue of $6 million, up 35.5% year-over-year. Additionally, the company smashed Wall Street revenue estimates by around 20%. That’s a testament to the business’ strong momentum. Now generating profitability and positive net income, Data Storage remains a small-cap disruptor worth considering for big-time growth.
Data Storage operates four data centers across the U.S. and Canada. As more companies rush to leverage big data and AI, I expect interest in Data Storage’s infrastructure and analytics offerings to swell dramatically. Its solutions enable organizations to efficiently store, protect, recover, and analyze the troves of data needed to power next-gen AI.
Considering the breakneck pace of technological change, Data Storage finds itself in the right place at the right time. Its proven capacity to drive substantial revenue growth makes me confident in its long-term trajectory. If Data Storage continues executing at this level, I believe DTST stock could explode over the coming years.
Nerdy (NRDY)
I’m betting on Nerdy (NYSE:NRDY) to harness AI’s immense potential in the vast education market. Its platform revolutionizes learning through AI-powered features like personalized tutoring, embedded assessments, and automated study planning.
The company’s investments into AI to increase engagement are already showing tremendous dividends. With surging users, revenue per user, and an annual recurring revenue of $164 million, Nerdy has become a top AI-adjacent play I think is overlooked right now.
Indeed, in the third quarter alone, Nerdy grew its learning membership subscriptions to 39,500. Average revenue per user per month soared to around $346 – more than triple last year’s levels. Meanwhile, the business’ focuses on upselling through high-dosage tutoring and parent/teacher outreach remains an attractive focal point of current investors.
Profitability remains a couple of years away, but with $84 million in cash and no debt, Nerdy has ample runway to cement itself as a leader in the edtech sector. Annualized sales growth of more than 20% seems reasonable to expect moving forward, too.
Nerdy recognized AI’s immense potential to transform learning early on. As AI capabilities advance exponentially in the 2020s, I foresee online learning platforms like Nerdy reaping the rewards.
OppFi (OPFI)
Serving financially under-served consumers, OppFi (NYSE:OPFI) is an AI-powered fintech company I view as a turnaround play. Its platform facilitates transparent and responsible loans, with the company partnering with community banks. Powerful AI technology drives the company’s growth potential in risk management, fraud prevention, and customer service.
As interest rates cool in 2024, I expect loan demand to rebound sharply. When borrowing picks back up, OppFi’s AI-enabled platform positions it perfectly to capitalize. Growth-oriented investors would be wise to take a position before the herd catches on.
Consider OppFi’s massive opportunity once macro conditions improve. Major banks are shying away from lending to subprime consumers. This is allowing disruptors like OppFi to own this segment. Its tailwinds include long-term fintech secular expansion along with the increasing growth of technology within the world of traditional finance.
With interest expenses currently weighing heavily on profitability, lower rates later this year could prove to be an inflection point for the company. In Q3 2023, OppFi’s interest and amortized debt expenses exceeded $12 million. But once the Fed pivots to an even more dovish stance, I believe OppFi’s margins and valuation multiple could balloon.
Trading at just 0.13-times sales and 7.7-times forward earnings, OppFi offers intriguing value relative to disruptive fintech peers. If macro trends shift favorably in 2024 and beyond, OPFI stock can deliver multi-bagger returns for early investors.
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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.
