AI Investing: 12 Possible Ways To Maximize Your Returns

By Lorimer Wilson
Saturday, September 23, 2023 12:32 AM EST

c GlidewellDental, 2022

Investing in the artificial intelligence (AI) sector should generate fantastic returns over the next decade but most people are not investing in it the best way. Why? Because they’re focused on the mega/large cap AI & related (AI&R) stocks that often trade for hundreds of dollars per share yet there are a number of less expensive, and potentially more explosive, micro/small cap AI&R stocks (i.e., stocks with market capitalizations above $50M but less than $2B) flying under the radar that warrant your attention.

What Is AI? 

AI is the process of programming a computer to make decisions for itself. This can be done through numerous methods, including but not limited to machine learning, natural language processing, and predictive modeling.

Why Invest In Micro/Small-cap AI&R Stocks? 

Micro/small cap AI&R stocks offer investors the opportunity to get in on the ground floor of the AI&R megatrend with stocks that usually trade for less than $10/share or less and, as such are a fraction of the cost of investing in the popular mega/large cap AI&R stocks (think Tesla @ $250/share, Meta Platforms @ $300/share, Nvidia @ +$450/share, Adobe @ +$550/share, Lam Research @ +$650/share, and Broadcom @ +$850/share).

Keep in mind, however, that micro/small cap AI&R companies, usually being relatively new to the market, are often undervalued, not known by investors, and have a wider spread between bids and asking prices given that there tend to be fewer shares of these stocks available. They are generally considered to be speculative investments due to their size, stability, and potential for manipulation, and, as such, they carry a certain element of risk - but it’s this risk that provides the opportunity for investors to make significant gains. That being said:

  • AI&R is going to play a major role in the future of technology, and investing in less expensive AI&R micro/ small cap AI&R stocks is the best way to get wider exposure to that growth with less money invested. For example, a $500 investment might only buy you as few as 1 or 2 shares of a recognizable blue-chip mega/ large cap AI&R stock or it could buy you 50+ shares of a stock priced at below $10 or of several stocks trading at that price level. If one, or more such companies were to grow and become a mid-cap stock, for example, you would see a lot more profit than you would have by investing in a larger, more popular AI&R stock.
  • Another approach to capitalizing on the major growth coming in AI&R stocks is to focus on those micro/small-cap AI&R stocks that have the best chance of becoming key suppliers to the mega- and large-cap companies that are at the forefront of AI. For example:
    • in 2007, Cirrus Logic (CRUS) became a key supplier to Apple (AAPL) of its audio chips which were integral to the iPhone’s sound system, and because the iPhone was such a popular product investors piled into Cirrus Logic which returned 1,320% in the decade following the release of the iPhone compared to the 500% return of Apple shares and
    • Imagination Technologies, a supplier of image processing chips that helped lay the groundwork for the increasingly sophisticated camera systems we see in iPhones today, returned 1,782% from 2008 to 2012 versus a 168% return for Apple shares over that time.
    • In 2021, AEHR Test Systems, a tiny semiconductor testing company, became Tesla's (TSLA) main partner for ensuring the reliability of its chips and, in the ensuing months, returned 1,211% while the shares of Tesla remained flat.
    • The above examples, from an article by Colin Tedards, Editor of The Bleeding Edge, illustrate the opportunities that exist in the coming months and years in the stocks of suppliers and testing companies serving the major AI&R companies.

As you can see from the above, there are some risks and volatility associated with stocks under $10/share, and particularly with stocks trading at less than $5. However, it once again all comes down to playing it smart and doing your research. To help you with that we present below our munKNEE Micro/Small AI Stocks Index consisting of 12 micro/small cap AI&R stocks (average market capitalization of $403M) with a description of their businesses, price-to-sales ratios (PSRs), price changes YTD (as of September 21st) and recent news in the media.

  1.  Applied Digital (APLD): +182.6% YTD
    • a designer, builder, and operator of next-generation digital infrastructure that is designed for High-Performance Computing applications.
      • In May it launched its AI Cloud services that will provide high-performance computing power for AI applications, including large language model training, graphics rendering, and more receiving its first major AI customer agreement later in the month worth up to $180 million over a 24-month period, in June with a second AI customer agreement worth up to $460 million over 36-months, in July Hewlett Packard agreed to make its supercomputers accessible through Applied Digital's AI cloud service to support critical workloads such as AI, in August achieved “Elite Partner” status in the NVIDIA Partner Network.
    • Market Capitalization: $515M;
    • Forward Price-to-Sales Ratio: 1.4
    • Read:
  2. Innodata (INOD): +171.1% YTD
    • its Digital Data Solutions segment engages in the provision of AI data preparation services; collecting or creating training data; annotating training data; and training AI algorithms for its customers, as well as AI model deployment and integration services.
    • In August it signed an agreement with its fourth Big Five technology customer to support their generative AI development initiatives.
    • Market Capitalization: $220M;
    • Forward Price-to-Sales Ratio: 2.8
    • Read:
  3. Rekor Systems (REKR): +130.8% YTD
  4. Evolv Technologies (EVLV):: +126.6% YTD
  5. BigBear.ai (BBAI): +120.9% YTD
  6. Rigetti Computing (RGTI): +119.2%
  7. SoundHound AI (SOUN): +96.9% YTD
  8. Verses AI (VRSSF): + 95.7% YTD
  9. GSI Technology (GSIT): +60.1% YTD
  10. Presto Automation (PRST): +31.9% YTD
    • is a labor automation technology provider in the hospitality industry that has developed a system that offers operations a portfolio of tabletop, handheld, and wearable devices supported by a suite of cloud-based services to enable guest ordering, payment, and surveys, as well as cloud-based operations metrics, security, and support monitoring in real-time.
    • Its voice products use speech recognition technology in the customer order process and connect its cloud-based solution with restaurant point of sale systems by automatically transmitting orders to the restaurant's POS system while its vision product consists of a platform-based AI-powered computer vision software application that provides real-time error detection, visual order tracking capabilities, and repeat guest identification, as well as transaction services geared to enhance the customer dining experience, including premium content gaming.
    • Market Capitalization: $173M;
    • Forward Price-to-Sales Ratio: 6.2
    • Read:
  11. Lantronix (LTRX): +21.8% YTD
    • provides solutions for video surveillance, infotainment systems, and intelligent substations infrastructure that enhance the value and utility of modern electronic systems and equipment through secure network connectivity.
    • Market Capitalization: $178M;
    • Forward Price-to-Sales Ratio: 1.0
    • Read:
  12. Recursion Pharmaceuticals (RXRX): +8.4% YTD

With the above information in hand, ask yourself these 3 questions:

  1. Which companies, if any, have the potential of becoming major suppliers to any of the major AI developers?
  2. Which companies, if any, are developing or already have AI products/applications in place that have the potential to become the next big thing?
  3. Which companies, if any, have AI technology, or technology in development, that makes them a prime acquisition target for one of the major AI tech companies?

Do your own investigation and if you find answers to any of the above questions consider investing in one or more of the stocks and you could be well-positioned to generate fantastic returns over the next decade.

  • Definitions:
    • *The P/S ratio (PSR) describes how much someone must pay to buy one share of a company relative to how much that share generates in revenue for the company. and, as such, determines whether its stock is cheap or overpriced in comparison to its peers. While the ideal ratio depends on the company and industry, the ratio is typically good when the value falls between one (1)  and two (2) and a ratio of less than one (1`) is even better. According to Eqvista (see here), the average ratio for the semiconductor sector is 9.75 and, according to FullRatio (see here), it is 2.18 for information technology services stocks.

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Disclosure: None

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