Artificial intelligence has fueled the stock market over the last 12 to 15 months. Many have suggested that its emergence alone is the reason the economy did not collapse in 2023 and remains strong today. AI also fuels penny stocks, many of which have incredible potential to produce rapid returns.
That said, investors know the drill. Investing in penny stocks requires discipline. The generally accepted wisdom suggests that no more than 10% of an investor’s portfolio should be directed toward speculative plays including penny stocks.
Those willing to gamble a portion of their portfolio would do well to understand the confluence of penny stocks and artificial intelligence. The artificial intelligence market is expected to multiply in value in the coming years. Penny stocks tend to have a multiplier effect when successful. Point being, there is significant potential for outperformance. Invest in these AI penny stocks only if you have the capital to spare.
ParaZero (PRZO)
ParaZero (NASDAQ:PRZO) stock represents an Israeli firm that makes autonomous parachute safety systems for unmanned drones. The company’s smart parachute systems monitor unmanned aerial vehicles leveraging machine learning and AI in the process.
I think ParaZero is particularly interesting because the company is not particularly high risk but does represent high reward. The reason I believe the company is not particularly risky is that it has enough liquidity to continue its operations for at least two more years. Meanwhile, sales are growing and increased by nearly 11% in the most recent quarter. That’s clearly not a high rate but the company operates in a stable sector.
The company was successful in shifting its business model toward integrations with OEMs as opposed to the aftermarket segment. The point here is that ParaZero could logically find large wins among defense firms, particularly in the U.S. While the company only reported $620,000 in sales in 2023, it could change drastically if the company manages to land a major deal. The company has enough liquidity to seek those deals for at least two years. That gives me reason to believe it could rocket upward at any point.
Predictive Oncology (POAI)
Predictive Oncology (NASDAQ:POAI) is one of many drug discovery stocks attempting to leverage AI to dramatically increase time to market. Cancer continues to be one of the greatest killers and the company’s oncology focus is thus full of potential.
So, what does the company do? The company has leveraged a biobank of 150,000 tumor tissue samples which it has combined with the power of artificial intelligence. It’s not dissimilar to what many other drug discovery firms are doing. These drug discovery firms believe that machine learning will drastically increase the speed at which successful molecules can be discovered. While that’s true, predictive oncology is one of many firms all attempting to do the same thing.
In other words, there is no particular reason to believe the company has a better chance of success than any other drug discovery firm. Shares have halved in 2024, falling to below $1.70. Investing in POAI shares is simply gambling on the drug discovery narrative. It might reward investors handsomely or it might punish them just as easily.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ:SOUN) continues to carve out substantial market positions among AI penny stocks, which leads me to believe in SOUN moving forward.
Many investors were aware of SoundHound AI’s position in the restaurant AI market and have been for some time. The company has emerged as one of the biggest names in the voice AI market with particular strength in the application of AI to restaurant ordering. SOUN is now the largest AI voice provider for restaurants following its acquisition of SYNQ3.
The company does not lack for demand based on a backlog valued at $661 million which has doubled on a year-over-year basis. The stock exploded when it was revealed that Nvidia (NASDAQ:NVDA) is a major investor in the company. Then, investors pulled back more recently. Investors should remind themselves that revenues grew by 80% during the fourth quarter. There’s a lot more to the company than the hype surrounding its connection to Nvidia.
SoundHound AI has also carved out a strong position in the application of AI voice to the automobile industry. More than 20 car makers have integrated its technology into their respective platforms. SoundHound AI continues to find tangible applications for its technology. It has managed to carve out substantial market positions for those applications which will continue to benefit shareholders moving forward.
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.
