Investing in a high-growth domain such as artificial intelligence (AI) is great if you’re seeking perpetual gains. However, financial markets are quickly priced in, meaning the bigger names, such as Advanced Micro Devices (NASDAQ:AMD), probably won’t provide you with the AI-growth story you’re looking for.

AMD stock has surged by approximately 90% year-over-year, supported by the AI narrative and a series of earnings target beats. As such, it’s clear that systematic support for AI stocks is intact. However, I want to revert to my opening statement and reiterate the possibility of the AI story already being priced in.

So, how should AI be played from here on in? I suggest opting for overlooked small-cap AI stocks instead of banking on the more prominent names. I screened through numerous small-cap AI stocks and discovered three gems; let’s discuss each in depth.

BigBear.ai Holdings, Inc. (BBAI)

BigBear.ai Holdings (NYSE:BBAI) is a decision intelligence solutions company with a presence in logistics, enterprise operations, autonomous systems and cybersecurity. The firm leverages a broad range of capabilities to capitalize on various end markets, including government and defense, manufacturing, warehousing and healthcare.

Although an early-stage enterprise, BigBear.ai has significant potential. The broad-based AI commerce transition is more complex than most believe. In fact, I’m willing to argue that a transition is impossible without the help of third parties like BigBear.ai due to the array of esoteric concepts involved. As such, it’s no surprise that the AI consulting market is set to grow by 26.49% per year until 2031.

BigBear.ai released its fourth-quarter results last month, revealing $40.56 million in revenue and a loss of 14 cents per share. Despite running at a loss, BigBear.ai is growing at scale and set to achieve full-year revenue between $195 and $215 million. Moreover, BigBear.ai secured additional cash proceeds of $54 million last year, allowing further reinvestment and low solvency risk. Sure, the company’s bottom line does matter, but its comprehensive growth suggests net profitability is en route.

The question now becomes: Is BBAI stock undervalued?

I don’t want to provide a hard-lined answer, but BBAI stock’s price-to-sales ratio of 1.97x is below the sector median of 3.03x, indicating that relative value is in store. Therefore, asymmetrical returns are likely, especially given the company’s resilient fundamentals.

Innodata, Inc. (INOD)

Innodata (NASDAQ:INOD) plays a vital role in the AI value chain. In short, Innodata primarily provides data collection and training solutions to external parties.

Anybody with data analytics experience may concur that data collection, cleansing and training are the most cumbersome stages of data analysis. Thus, it’s no surprise that Innodata decided to target them. Its offerings cover image, text, speech and conversational data, while its methodologies range from machine learning to neural networks. In essence, the company has a presence wherever it matters.

Furthermore, a fundamental overview of Innodata communicates stealth. The company generated $26.1 million in fourth-quarter revenue, up 35% year-over-year. Moreover, Innodata’s quarterly earnings before interest tax depreciation and amortization (EBITDA) settled at $4.3 million for the quarter. Lastly, the company achieved a quarterly net income of $1.7 million, a substantial contrast to the $2 million loss it suffered a year earlier.

I decided to judge INOD’s capital market-based prospects from a technical perspective. Although INOD stock has shed nearly 20% of its value since the turn of the year, key metrics suggest that an inflection point has occurred. For example, INDO has reached a resistance level, recently breaching its 10-day moving average. Moreover, INDO’s Put/Call ratio of 0.29x shows it has garnered plenty of attention from bullish options traders.

Inodata stock is primed for growth!

Duos Technologies Group (DUOT)

Duos Technologies (NASDAQ:DUOT) operates in the enterprise information management space. Additionally, it offers AI algorithm development and deployment, which is the focal point of today’s coverage.

Much of Duos Technologies’s allure stems from its reputation among credible end-market clients such as the U.S. Department of Homeland Security, Amtrak, Ferromex, and Metra, to name a few. Additionally, Duos Technologies recently sealed a $2.4 million AI agreement with a Class 1 railroad involving subscription and services revenue; not bad for a company with an annualized revenue base of below $12 million…

Duos Technologies is positioned to add valuable contracts to its backlog as it operates in an underserved industry. Moreover, key metrics suggest its stock is aligned to prosper for the remainder of the year. For example, the stock’s near 50% year-to-date surge has sent it above its 50—and 100-day moving averages, yet its relative strength index remains subdued in the mid-50s, suggesting the stock is far from being overbought.

DUOT stock is a risky bet, but it might just be worth it in the end.

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Read More:Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Steve Booyens did not hold (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.