Consider this Small Cap Play for the AI Revolution

While the stock market has rewarded companies moving into the artificial intelligence (AI) space this year, the ride hasn’t been a smooth one. That’s actually a good thing for investors. Pullbacks create buying opportunities.

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  • And the important thing for investors is to buy smaller AI companies that can see big growth – and share price appreciation – over time. That means looking for companies that have small market caps – under $100 billion – which takes a lot of household tech names off the table.

    But that still leaves plenty of AI plays. One such play is (AI). Shares have had a great run so far this year, nearly tripling. But with a market cap still under $4 billion, this play on AI has room to run. And that’s even after the company’s CEO has “declared victory” in AI.

    As an early stage company, still isn’t profitable. However, there’s no debt on the company’s balance sheet, and over $700 million in cash, or about 20 percent of the market cap. So even with revenue still ramping up, it’s an early-stage company that won’t need more capital.

    Action to take: Shares hit over $44 in the AI spike higher last week. Since then, they’ve dropped following earnings to the low $30 range. That’s a reasonable long-term entry point for patient investors.

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  • For traders, last week’s drop took some steam out of high-priced option premiums. The October $45 calls, last going for about $4.50, are still a bit pricey, but could see triple-digit gains on the next boom in shares in the coming months.


    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.