Few sectors have been as hot as artificial intelligence. It’s possible to find AI stocks that have surged by over 500% within the past five years. Despite the massive rally, some of these same stocks have plenty of additional room to run.
Nvidia (NASDAQ:NVDA) was the biggest winner among the large-cap leaders. However, investors can realize higher returns by focusing on smaller companies. Corporations with lower market caps have a larger market that they can address.
The larger tech companies have established a stronger presence in the market, hindering their potential for future growth. These companies can generate revenue growth in the double digits, no doubt about it. However, apart from Nvidia, larger companies struggle to achieve year-over-year revenue growth exceeding 50%.
Investors looking for promising new companies in the AI industry may want to accumulate shares in these three stocks.
Axcelis Technologies (ACLS)
Axcelis Technologies (NASDAQ:ACLS) performs a critical service that helps AI chips achieve optimal performance.
The company is a global leader in ion implantation systems and services and has been drumming up more business between AI chips, electric vehicles, and other semiconductor-reliant resources.
The company aims to earn over $1.1 billion in revenue in 2023. A loaded backlog and $292.3 million in Q3 revenue make that goal achievable.
That revenue figure represents 27.6% year-over-year revenue growth when the industry faces many headwinds. Lower interest rates and rising consumer demand can lead to higher revenue growth in the future.
Net income growth came in at 63.7% year-over-year. That growth helped the company secure a net profit margin above 20%. Shares have already soared 72% year-to-date and are up by more than 650% over the past five years. However, the stock can generate more gains.
Shares only trade at a 19 P/E ratio and are down by 20% over the past six months. The pullback, low valuation, and attractive financials make this one of the most interesting AI stocks out there.
Symbotic (SYM)
Symbotic (NASDAQ:SYM) is using artificial intelligence to reinvent logistics. The company’s software and physical AI bots allow companies to move inventory more efficiently.
Symbotic has relationships with many retailers and other businesses, but Walmart (NYSE:WMT) is the largest customer.
Walmart is a majority investor that holds a 62.2% stake in the company. The two companies also recently expanded their partnership.
David Guggina, Senior Vice President of Innovation and Automation at U.S. Walmart, mentioned that the Symbotic system allows them to deliver products to consumers faster and with less friction. Walmart can have the technology retrofitted in all of its warehouses as early as 2030.
Symbotic only recently became publicly traded through a SPAC and has been a top performer ever since. Unlike many SPACs that have faltered soon after their public offerings, Symbotic has surged by over 300% year-to-date.
Symbotic recently closed out fiscal 2023 with 98% year-over-year revenue growth. Net losses have been getting smaller and a path to profitability looks close.
Perion (PERI)
Perion (NASDAQ:PERI) is a small advertising company that is swimming in cash and has a low valuation. Still, it’s one of the AI stocks you don’t want to sleep on.
The stock has a 13 P/E ratio while generating 17% year-over-year revenue growth and 28% year-over-year net income growth in the third quarter.
The stock is up 21% year-to-date and has gained over 1,000% over the past five years. A market cap under $2 billion and innovative advertising solutions suggest the company has more room to run.
Perion gives businesses exposure to many advertising platforms, such as search, social, and Connect TV. The company’s recent $100 million acquisition of Hivestack gives it exposure to the rapidly growing digital out-of-home advertising (DOOH) industry.
This advertising channel turns ordinary public spaces into targeted advertising experiences. We expect the DOOH ad industry to achieve a 10.8% compounded growth rate from now until 2032. That growth rate will take the industry to $37.5 billion by 2032.
DOOH has tremendous synergies with Perion’s core ad offerings. The company uses artificial intelligence to enable optimal ad placements. The company is also making strides with its new Waveform Audio Voice Engine product.
It’s a generative AI-powered dynamic audio solution that lets advertisers use personalized audio messages in their ads. These AI-powered audio messages adjust in real-time to parameters like weather, location, time of day, and other factors.
On this date of publication, Marc Guberti held long positions in ACLS and PERI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.