There’s a strong argument to be made that investors should consider mid-cap AI stocks currently. The markets expect that the Fed will hold interest rates steady moving forward. Rate cuts will likely begin sometime in early to mid-2024. That will benefit mid-cap stocks in particular.

Mid-caps tend to become cash-strapped in periods of high interest rates. Conversely, mid-cap stocks perform very well during periods of interest rate cuts.

AI stocks continue to do very well, and there continues to be a strong argument for investing in the sector. Let’s look at some stocks that combine those two factors because they have a lot of potential to grow rapidly.

Jabil (JBL)

Jabil (NYSE:JBL) is a manufacturing company that employs more than 230,000 people. The company touches many Industries and sectors, including automation. Its market capitalization is just over 14 billion dollars, which puts it in the mid-cap stock conversation.

As mentioned, Jabil is connected to the automation sector. The automation sector continues to invest heavily in AI. Artificial intelligence can drastically increase the efficiency of manufacturing. Jabil Is particularly relevant to the improvement of quality control. Manufacturing environments typically include automated optical inspection (AOI) machines. These machines identify defective products at a typical rate of between 60 to 70%. However, Jabil has added AI to its automated Optical inspection machines and, as a result, has seen those rates rise as high as 97%.

Jabil has seen its revenues contract slightly during the most recent quarter. However, sales did increase overall during the fiscal year. Regardless of those arguable problems, its stock remains well-regarded on Wall Street. The analysts covering its shares believe they have a substantial upside based on current prices.

Nio (NIO)

There’s plenty of reasons to avoid shares of Nio (NYSE:NIO) at the moment. The Chinese electric vehicle firm has seen its stock decline as it faces trouble on many fronts.

Those troubles can be best summarized by a single number: $835.1 million. That was the net loss that Nio reported during the second quarter. It represented nearly a 120% increase on a year-over-year basis. Not a strong number. Overall, vehicle sales declined by 24.9%.

However, Investors shouldn’t ignore the company. Nio continues to experience rapid increases in vehicle deliveries. In October, deliveries increased by 59.8%, reaching 16,074 vehicles. Yes, the company has to improve its operations to improve its losses. The company announced that it will cut 10% of its labor force. That will result in improvements as labor costs tend to be the highest fixed cost. In short, there continues to be a reason to believe in NIO stock.

Nio He’s heavily focused on automation to reduce labor costs. The company recently announced that It aims to reduce its workforce by 1/3 by 2027. To do so, the company will rely heavily on AI-automated robots.

Digital Ocean (DOCN)

It’s always a good sign when Wall Street is on your side. Digital Ocean (NYSE:DOCN) Is a recent beneficiary of Wall Street’s backing. Oppenheimer analyst Timothy Horan recently upgraded his firm’s outlook for the stock to ‘Outperform.’ Horan cited strong AI demand and The notion that Enterprise adoption is set to surge.

The company helps firms more quickly deploy applications and primarily serves small and medium businesses (SMBs). The company recently released research on ai/ml that bodes positively for its immediate prospects. 78% of organizations that it surveyed intend to increase spending in the area in 2024. Furthermore, 37% of those same firms expect to increase cybersecurity spending, while 35% utilize multi-cloud approaches.

That data strongly suggests that the company, which grew its revenues by 16% in Q3, will continue to grow. Small and medium-sized businesses are expected to increase their investments as rates decrease in 2024. Those firms have had less room to invest in the high-rate environment. They tend to have lower cash reserves than their larger counterparts. That also suggests that Digital Ocean is pivoting into a period of increased growth.

SoundHound (SOUN)

SoundHound (NASDAQ:SOUN) is a conversational AI stock that investors should consider. Conversational AI, as the name suggests, utilizes artificial intelligence for the purpose of conversation. Thus, it has applications across various fields, including TV, Internet of Things (IoT), and customer service, among others.

SoundHound is one of the best-known names in the conversational AI space. Now that the generative AI conversation has cooled somewhat, investors are particularly looking into conversational AI. The company very recently announced its new product called ‘Employee Assist.’ The service allows employees working in fast food to ask real-time questions to improve customer service.

Fundamentally, SoundHound continues to improve. Revenues increased by 19% during the most recent quarter, reaching $13.3 million. Meanwhile, losses improved by 33%, while EBITDA losses improved by 57%.

The company benefits from particularly strong relationships with franchise chains, including Jersey Mike’s and Krispy Kreme. The company is also very well integrated with DS Automobiles, a Stellantis (NYSE:STLA) subsidiary.

Nerdy (NRDY)

Nerdy (NYSE:NRDY) is below the lower end of the mid-cap market capitalization of $2 billion. Its market cap is closer to $450 million. Although it is a small-cap firm, it does deserve attention in the AI stock space.

The company’s platform for education provides instruction on over 3,000 subjects. The company has leveraged artificial intelligence and machine learning in building that platform. The company uses AI to connect tutors to students. Further, the company’s AI Services allow Experts to create AI-generated lesson plans. Nerdy’s proprietary AI for HI infrastructure Has helped the company deliver more than 10 million hours of one-on-one tutoring.

Fundamentally, Nerdy looks strong. The company exceeded revenue and non-GAAP EBITDA guidance for the third quarter. Nerdy Also announced offerings that are tailored to the learning requirements of specific districts as well as those tailored toward parents. By adhering to District-by-District learning standards, the company should have a solid opportunity to increase sales.

Rekor Systems (REKR)

Rekor Systems (NASDAQ:REKR) utilizes AI to improve the hardware and software solutions it provides to the market. The company refers to itself as a roadway intelligence firm. It sells software that captures vehicle analytics and Hardware, primarily including cameras. In short, Rekor Systems collects mobility data that will be highly important across multiple sectors.

IoT firms and vehicle manufacturers immediately come to mind as solid sales channels for the company. At the same time, the company heavily markets itself toward the public safety sector. Its headquarters are located in Columbia, Maryland, just outside Washington D.C.

From a fundamental perspective, the company has a lot to like. Third-quarter revenues increased by 35%, reaching a record $9.1 million. The company’s AI revenues grew by 268% during the period between 2018 to 2022. Further, the company’s EBITDA losses narrowed during the period. Management also noted that the company expects to beat its current full-year guidance, which should send a strong signal to the markets.

SES AI (SES)

SES AI (NYSE:SES) manufactures Li-Metal cells used in batteries. The company and stock also integrate artificial intelligence and machine learning into its processes. 

The company is developing two fundamental platforms, one of which is called superintelligence scientists. That platform Is where the company trains Machine learning models to create new materials and processes.

The company intends to produce B Sample cells this year. The company expects to sign a joint development agreement (JDA) with an original equipment manufacturer (OEM) soon. If it does so, it would be the first Li-Metal B-Sample in the automotive industry. Thus, SES AI is at the vanguard of current battery chemistry and deserves investors’ attention.

The company’s batteries provide higher energy densities than its competitors, which use safer chemicals. The company has constantly sought to balance the highest safety parameters possible with its current chemistry, which has been difficult. The company posits that competing battery chemistries make unacceptable concessions regarding energy density in the name of safety. The company is now on the precipice of delivering its B-Sample cells to OEMs. If those manufacturers find those cells acceptable, the company will be much stronger.

On the date of publication, Alex Sirois 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.