3 Small-Cap Growth Stock Picks for AI and Cybersecurity Exposure


  • The growing importance of cybersecurity in our increasingly digital lives, and the promising investment potential of AI make these stocks a good investment.
  • SoundHound AI (SOUN): This AI company has explosive growth and an expanding customer base.
  • BigBear.ai Holdings (BBAI): Strong top-line forecasts and new acquisitions make this stock attractive.
  • CXApp (CXAI): Opportunities within its AI-based app give CXAI a strong foothold within its industry.
Small-Cap Growth Stocks to Buy - 3 Small-Cap Growth Stock Picks for AI and Cybersecurity Exposure

Source: Andrey_Popov / Shutterstock.com

The AI sector is experiencing substantial growth, with market projections pointing towards a remarkable surge to $1.3 trillion by 2032. This promising outlook for the industry fuels confidence from investors to buy into the leading small-cap AI growth stocks. AI stocks of all sizes are anticipated to outperform the overall economic growth trajectory. The global cyber security market is expected to witness significant expansion, forecast to climb from $172.32 billion in 2023 to $424.97 billion by 2030. The significance of cybersecurity continues to escalate due to our increasingly digital lives. As data amounts soar and new software emerges, online security is crucial and only getting more challenging.

These forecasts highlight the compelling investments to buy in the tech sector, but small-cap AI and cybersecurity stocks are even better. Small-cap growth stocks can offer significant potential and opportunities for high returns. Many of these companies have fantastic room for expansion and allow investors to capitalize on emerging trends and innovations. Here are three of the best small-cap growth stocks to buy in AI and cybersecurity.

SoundHound AI (SOUN)

SoundHound Inc.'s (SOUN) Headquarters exterior. The company develops voice-recognition, natural language understanding, sound-recognition and search technologies.
Source: Tada Images / Shutterstock.com

SoundHound AI (NASDAQ:SOUN) develops voice artificial intelligence solutions that enable businesses to provide AI conversational experiences for their customers. SOUN stock has skyrocketed nearly 160% year-to-date. And, analysts indicate it could still increase. The stock currently has a median price target of $7.00, while currently trading for $5.38. 

On the operational side, in Q1 2024, SoundHound generated $11.6 million in revenue and $6.9 million in gross profit. Those marked increases of 73% YOY and 46% YOY, respectively. However, while growth was strong, the company reported a GAAP net loss of $33 million. The loss was mainly caused by increased R&D, sales, marketing and G&A expenses. Yet, given that SoundHound is still a fast-growing company, it can outgrow the losses as it continues to scale. Additionally, with $226 million in cash, the company has a strong balance sheet and is equipped to continue funding its business. 

Looking forward, SoundHound expects to generate $65 million to $77 million in revenue in 2024 and to reach adjusted EBITDA profitability in 2025. 

This past quarter, SoundHound closed the acquisition of SYNQ3, a leading provider of voice AI solutions to the restaurant industry. The deal significantly expanded SoundHound’s market reach, with SYNQ3 contributing over 10,000 signed restaurant locations to its customer base. This growth and current small-cap status show that SoundHound is undervalued. It is definitely one of the small-cap growth stocks you will want to buy now while its a bargain.

BigBear.ai Holdings (BBAI)

BigBear.ai (BBAI) is a leading provider of high-speed decision-making technologies. They specialize in AI-driven analytics and solutions for critical missions
Source: MacroEcon / Shutterstock.com

BigBear.ai Holdings (NYSE:BBAI) provides AI-powered decision intelligence solutions in three core markets: global supply chains and logistics, autonomous systems and cybersecurity. The company’s platform helps its customers manage themselves more effectively. BBAI currently trades for $1.60, down nearly 37% YOY. However, analysts are extremely bullish, and 6 analysts hold a median price target of $3.75. 

Recently, BigBear.ai has been experiencing sluggish growth, with revenue primarily flat last year. And, quarterly revenue decreased 21.4% to $33.1 million in Q1 2024. However, for 2024, BigBear projects revenue between $195 million and $215 million, an increase of 25.8% to 38.7% YoY. Recently, BigBear.ai has also been awarded several new contracts and deals, so if this trend continues, top-line growth could fall in line with the optimistic predictions. Additionally, while the company is not yet profitable, it is expected to begin generating profits in the coming years. 

Most recently, BigBear.ai acquired Pangiam, a company which provides solutions for the global trade, travel and digital identity industries. The acquisition will unite Pangiam’s facial recognition and advanced biometrics capabilities with BigBear’s computer vision capabilities, establishing a comprehensive Vision AI portfolio and positioning BigBear.ai as a foundational leader in the application of AI. 


Automated stock trading concept. Robotic hand analyzing financial data on stock exchange, artificial intelligence utilization to predict precise price change in stock market. Trailblazing. trillion-dollar ai stocks. AI Stocks with Potential. stocks to buy. Strong Buy AI Stocks
Source: Owlie Productions / Shutterstock.com

CXApp (NASDAQ:CXAI) is an AI software company that offers a workplace super app that streamlines communications, meetings and reservations. The goal is to offer organizations in an all-inclusive security platform.

CXAI stock is up 168% YTD. Although investors may question the company’s potential for continuing growth, CXApp’s status as a small-cap stock means it likely has much more growth. Analysts have rated the stock as a buy.

Since its establishment, CXApp has witnessed massive growth in sales. Last year, its free cash flow was in the green for the first time, at $6 million dollars. This demonstrates the company’s strong financial management. The company has also shown profitability, as its EBIT grew from $-2,950 in 2022 to $5,223 in 2023.

In conclusion, CXApp is an excellent stock for investors focused on growth.

On the date of publication, Michael Que 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.

With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/3-small-cap-growth-stock-picks-for-ai-and-cybersecurity-exposure/.

©2024 InvestorPlace Media, LLC