Look for Smaller Companies to Benefit From the AI Revolution

The market has been excited about AI stocks for six months now, since the release of ChatGPT. Dozens of companies have announced plans to integrate AI hardware and software into their businesses. And it’s one part of the market where investors have been more than happy to send cash now.

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  • That’s led to a big rally in tech, that’s helped unwind most of 2022’s bear market. At this point, it’s time investors looked for AI stocks with a smaller market cap.

    That’s because big tech companies already have the headlines and story out. But smaller companies can still see a bigger percentage move higher in shares from here. One example is Marvell Technology (MRVL). The semiconductor company reported and earnings beat and raised guidance thanks to its work in the AI space.

    With a market cap under $50 billion, it’s only abut 5 percent the size of Nvidia (NVDA), the GPU manufacturer that set off the latest AI rally last week when it reported a massive earnings beat.

    Still, Marvell is down slightly over the past year and hasn’t been profitable. But it’s trading at 25 times forward earnings, less than half of Nvidia’s forward earnings estimates.

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  • Action to take: Investors can buy a small stake now and add to it on any drops, as the volatility in tech prices goes both ways.

    For traders, the short-term trend is still up, which bodes well for the September $70 calls. Last going for about $1.20, they could see high-double-digit returns from here on a further rally.


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

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