While artificial intelligence may be all the rage, investors seeking the top AI stock picks must be more careful now. Of course, you should always apply caution to a promising but wild sector. However, much of the low-hanging fruit among leading AI companies has been plucked.
Moving forward, investors must be judicious with their AI stocks to watch. As valuations start skyrocketing, the jitters of the weak hands of the market can wreak havoc. Therefore, it might make sense to target future AI market leaders; that is, anticipate which enterprises might be the big winners of tomorrow.
Of course, targeting lesser-known entities presents high risks. At the same time, the rewards could be paradigm-altering. With that, below are must-own AI stocks for the intrepid speculator.
Top AI Stock Picks: Cerence (CRNC)
With autonomous mobility about to spark a paradigm shift, tech player Cerence (NASDAQ:CRNC) should be on your radar for top AI stock picks. Specializing in conversational AI products, Cerence focuses on building the future of connected mobility. Impressively, the company’s website boasts over 800 patents along with over 475 million cars integrated with its technology. Since the start of the year, CRNC gained over 35% of its equity value.
Another factor that boosts CRNC as one of the AI stocks to watch is the expanding total addressable market. According to Mordor Intelligence, the driverless car market size will reach a valuation of about $33.48 billion this year. Further, the segment will likely accelerate at a compound annual growth rate (CAGR) of 22.75% to 2028. At the culmination of the forecast period, the sector may hit a value of $93.31 billion.
Keep in mind that Cerence carries a market capitalization of just over $1 billion. Finally, analysts peg CNRC as a consensus moderate buy with an average price target of $31, implying nearly 20% upside.
Duos Technologies (DUOT)
Based in Jacksonville, Florida, Duos Technologies (NASDAQ:DUOT) provides a broad range of sophisticated machine vision and AI solutions. In particular, the company has gained intrigue for its ability to automate and streamline railcar inspection processes, reducing dwell time and increasing system velocity. Notably, since the beginning of the year, DUOT veritably skyrocketed to a near-161% return. It’s one of the top AI stock picks, but can the momentum last?
With enough patience, DUOT could be one of the leading AI companies to put on your watch list. Several years ago, the University of Illinois Urbana-Champaign published research noting that a hybrid, machine-search but human-decision-based inspection process is over five times more efficient than manual inspections. Therefore, the paper reasons that technology – the kind that Duos specializes in – could lead to significant reductions in operational waste.
Unsurprisingly, analysts regard DUOT as one of the AI market leaders within niche but important segments. Pegged as a consensus moderate buy, the average price target comes in at $9.25, implying nearly 69% upside.
Knightscope (KSCP)
In my view – and probably in the opinions of others – security-focused tech specialist Knightscope (NASDAQ:KSCP) represents the riskiest idea among top AI stock picks. You can get a sense of the danger just by its price tag, only 10 cents above one dollar. Further, since the beginning of this year, KSCP fell more than 42%. And in the trailing one-year period, Knightscope shares tumbled nearly 59%.
Fundamentally, though, the security camera and robotics firm – which offers autonomous robots for monitoring people in shopping centers, neighborhoods, and other public areas – could be a surprise hit among must-own AI stocks. With high-profile incidents sparking heated tensions between law enforcement and the general public, Knightscope can cool temperatures. How? Ultimately, it may be easier for robots to address certain situations in a perfectly unbiased manner.
Of course, it’s a risky idea being so close to a literal penny stock. However, Ascendiant’s Edward Woo is willing to take a host, pegging KSCP a buy with a $3.50 price target. This forecast implies a whopping upside potential of 224%.
On the date of publication, Josh Enomoto did not have (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.