On July 14, Wedbush’s Dan Ives appeared on CNBC to discuss the expected tech sector earnings and explained how he thinks AI will give a boost to more than just the hyperscalers. According to LSEG, technology and communication services sectors were responsible for almost all of the earnings growth this season, and without them, overall earnings growth would be negative. Ives emphasized that the most significant factor behind this pattern, in his opinion, was the AI revolution which was spreading across software, cybersecurity, and cloud computing.
Ives then stated that if there were to be a weakness, it would likely come from networking players. Conversely, he expressed strong confidence in software. He particularly highlighted cloud computing and cybersecurity as significant beneficiaries due to the second and third derivatives playing out. He reiterated his view of the current period as a golden age for tech and believed the current earnings season was just the beginning, projecting a 10% to 15% rise in tech stocks in H2 of the year. However, cybersecurity has been lagging since the start of the quarter, even showing negative performance. Ives attributed the performance to a rotation of funds, possibly into higher-growth software and other AI-related plays. He contended that the market had misjudged the situation, believing that cybersecurity could be the biggest subsector performer for tech this year. He explained that as more services move to the cloud, cybersecurity would become increasingly essential.
That being said, we’re here with a list of the 10 best small cap AI stocks to buy according to analysts.
A portfolio manager, confident in her analysis, inspecting several stocks on her laptop screen.
Methodology
We used the Finviz stock screener to compile a list of the top small cap stocks that were trading under $5 billion. We then selected 11 AI stocks that had a high average upside potential of over 25%. The stocks are ranked in ascending order of their average upside potential. We’ve also added the hedge fund sentiment for each stock, which was sourced from Insider Monkey’s database, as of Q1 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Small Cap AI Stocks to Buy According to Analysts
10. Cerence Inc. (NASDAQ:CRNC)
Number of Hedge Fund Holders: 18
Market Capitalization as of July 16: $385.43 million
Average Upside Potential as of July 16: 12.23%
Cerence Inc. (NASDAQ:CRNC) is one of the best small cap AI stocks to buy according to analysts. On June 26, Cerence Inc. announced that its core technologies are powering the new agentic and GenAI capabilities within the 4th generation of Mercedes-Benz User Experience/MBUX.
The advanced system will debut in the all-new and all-electric Mercedes-Benz CLA, marking the first launch of Mercedes-Benz’s MB.OS operating system. Cerence AI’s solutions are fundamental to the MBUX Virtual Assistant and support conversational capabilities across 25 languages.
Cerence AI also allows MBUX to deliver more natural and empathetic interactions by analyzing a user’s voice and responding with varying emotional speaking styles through Cerence’s neural Text-to-Speec/TTS technology. The 2026 Mercedes-Benz CLA electric sedan, which will feature this new MBUX system, is expected to be released in the fall of 2025, with a hybrid version following early in 2026.
Cerence Inc. (NASDAQ:CRNC) provides AI-powered virtual assistants for the mobility/transportation market in the US, the rest of the Americas, Germany, the rest of Europe, the Middle East, Africa, Japan, and the rest of Asia-Pacific.
9. Ambarella Inc. (NASDAQ:AMBA)
Number of Hedge Fund Holders: 35
Market Capitalization as of July 16: $2.82 billion
Average Upside Potential as of July 16: 20.16%
Ambarella Inc. (NASDAQ:AMBA) is one of the best small cap AI stocks to buy according to analysts. On June 24, Bloomberg announced that Ambarella is reportedly exploring strategic options, including a potential sale. Bloomberg’s Ryan Gould and Dinesh Nair reported that the company is working with bankers and has reached out to potential buyers.
Ambarella designs chips primarily used in video recording, streaming, and ADAS for self-driving cars. Its technology focuses on edge AI processing and human vision applications, such as video security, electronic mirrors, drive recorders, driver/cabin monitoring, autonomous driving, and robotics.
Potential buyers could include rival chip companies that are seeking to enhance their automotive portfolios or private equity firms. Ambarella last posted an annual profit in 2017 but is forecasting a 28% revenue growth in FY2025, driven by increasing demand for its edge AI products, which now account for 75% of its sales.
Ambarella Inc. (NASDAQ:AMBA) develops semiconductor solutions that enable AI processing, advanced image signal processing, and high-definition/HD and ultra-HD compression.
8. Synaptics Incorporated (NASDAQ:SYNA)
Number of Hedge Fund Holders: 27
Market Capitalization as of July 16: $2.54 billion
Average Upside Potential as of July 16: 21. 21%
Synaptics Incorporated (NASDAQ:SYNA) is one of the best small cap AI stocks to buy according to analysts. Earlier in May, Synaptics announced a partnership with Murata Manufacturing to jointly develop a next-gen turnkey wireless connectivity module for automotive Tier 1 suppliers and Original Equipment Manufacturers/OEMs.
The collaboration will integrate Synaptics’ Veros Wi-Fi and Bluetooth combo Systems-on-Chips (SoCs), which feature highly integrated RF front-ends, into a module co-developed with Murata. Synaptics’ wireless SoCs are designed to optimize performance, minimize system design costs, and reduce power consumption.
Synaptics is using its Veros portfolio, which incorporates extensive expertise in IoT connectivity, to meet these requirements. The Veros portfolio for automotive applications includes the SYN4383 Wi-Fi 6E and SYN4384 Wi-Fi 7 products, which are pin-to-pin compatible and offer software upgradability.
Synaptics Incorporated (NASDAQ:SYNA) develops, markets, and sells semiconductor products worldwide and offers several wireless connectivity solutions, such as Wi-Fi and Bluetooth.
7. Recursion Pharmaceuticals Inc. (NASDAQ:RXRX)
Number of Hedge Fund Holders: 19
Market Capitalization as of July 16: $2.26 billion
Average Upside Potential as of July 16: 24.52%
Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) is one of the best small cap AI stocks to buy according to analysts. On July 8, Rallybio Corporation (NASDAQ:RLYB) announced a definitive agreement to sell its interest in REV102 to its joint venture partner, Recursion Pharmaceuticals. The deal is valued at up to $25 million, with an upfront equity payment of $7.5 million and near-term milestone payments.
REV102 is an ENPP1 inhibitor currently in preclinical development for the treatment of hypophosphatasia/HPP, which is a rare inherited disorder affecting bone and tooth mineralization. The program originated from a joint venture between Rallybio and Recursion focused on discovering and developing novel, orally available small-molecule inhibitors of ENPP1 for HPP patients.
REV102, the lead candidate from this collaboration, entered IND-enabling studies in early 2025. Rallybio will also receive low single-digit royalties on all future net sales of REV102 by Recursion. Rallybio may also receive additional payments if Recursion sells the REV102 program to a third party.
Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) is a clinical-stage biotechnology company that decodes biology and chemistry by integrating technological innovations across biology, chemistry, automation, data science, and engineering to industrialize drug discovery in the US.
Rallybio Corporation (NASDAQ:RLYB) is a clinical-stage biotechnology company that develops and commercializes life-transforming therapies for patients suffering from severe and rare diseases.
6. Vuzix Corporation (NASDAQ:VUZI)
Number of Hedge Fund Holders: 17
Market Capitalization as of July 16: $180.69 million
Average Upside Potential as of July 16: 26.58%
Vuzix Corporation (NASDAQ:VUZI) is one of the best small cap AI stocks to buy according to analysts. As May was coming to an end, Vuzix Corporation and Ramblr, which is a German AI startup that specializes in video intelligence for automating complex real-world tasks, announced a partnership. The collaboration aims to integrate a new level of AI-driven intelligence and interactivity onto Vuzix smart glasses for enterprise users.
The partnership enables frontline workers to use AI for real-time and context-based task analysis with an accuracy of 70%. By incorporating customer-specific data, Ramblr’s AI platform builds a deep contextual understanding of the environment. This allows it to provide natural language guidance and visuals directly to workers wearing Vuzix smart glasses.
According to the CEO of Vuzix, Paul Travers, deploying Ramblr’s AI agents on Vuzix M400 smart glasses will redefine user interaction with technology in both factory and everyday settings. A video demonstrating this functionality, titled “Ramblr and Vuzix Accelerate AI on Smart Glasses,” was published by Ramblr on May 29 and has 634 views and 16 likes. It has a duration of 1 minute and 31 seconds.
Vuzix Corporation (NASDAQ:VUZI) designs, manufactures, and markets AI-powered smart glasses, waveguides, and AR technologies in North America, Europe, the Asia Pacific, and internationally.
5. Evolv Technologies Holding Inc. (NASDAQ:EVLV)
Number of Hedge Fund Holders: 20
Market Capitalization as of July 16: $934.78 million
Average Upside Potential as of July 16: 27.19%
Evolv Technologies Holding Inc. (NASDAQ:EVLV) is one of the best small cap AI stocks to buy according to analysts. Earlier in May, Lake Street increased its price target for Evolv Technologies to $5.5, up from its previous target of $4, while maintaining a Hold rating on the shares. This followed Evolv’s Q1 2025 earnings report. The firm noted fewer headwinds in the business.
For Q1, Evolv reported a 44% year-over-year increase in revenue, which reached $32 million. Annual Recurring Revenue grew by 34% year-over-year, reaching $106 million, which showed subscription growth. Evolv successfully retained 92% of eligible education customers and 90% of deployed units.
However, the notable shift towards more pure subscription orders; while beneficial for ARR, may result in less upfront revenue recognition. Evolv’s market penetration is still in early stages, with its technology deployed in only about 1% of US school buildings and low single-digit percentages in hospitals and healthcare facilities.
Evolv Technologies Holding Inc. (NASDAQ:EVLV) provides AI-based weapons detection for security screening in the US and internationally.
4. Richtech Robotics Inc. (NASDAQ:RR)
Number of Hedge Fund Holders: 7
Market Capitalization as of July 16: $198.61 million
Average Upside Potential as of July 16: 73.41%
Richtech Robotics Inc. (NASDAQ:RR) is one of the best small cap AI stocks to buy according to analysts. On July 1, Richtech Robotics announced a sales agreement valued at over $4 million. The agreement was secured through its Chinese joint venture, Boyu Artificial Intelligence Technology Co. Ltd., with Beijing Tongchuang Technology Development Co. Ltd., and was officially signed on June 24 earlier this year.
The deal includes the purchase, service, and software licensing of products from 3 of Richtech’s robot lines. One is the ADAM, which is an AI-powered barista robot that prepares beverages. Another is the Scorpion, which is a service robot used in restaurant environments, while the Titan is a heavy-duty robot designed for delivery tasks. This is expected to boost Richtech’s Q4 2025 and generate recurring income from ongoing services and software licensing.
The multi-million-dollar agreement enhances the company’s presence in China and opens doors for additional opportunities across the broader Asian market. The company has already deployed over 400 robot solutions across the US in diverse sectors.
Richtech Robotics Inc. (NASDAQ:RR) develops, manufactures, deploys, and sells robotic solutions for automation in the service industry in the US.
3. Stagwell Inc. (NASDAQ:STGW)
Number of Hedge Fund Holders: 19
Market Capitalization as of July 16: $1.25 billion
Average Upside Potential as of July 16: 86.97%
Stagwell Inc. (NASDAQ:STGW) is one of the best small cap AI stocks to buy according to analysts. On July 3, Assembly, which is a media company and part of the Stagwell challenger network, announced the launch of “Assembly Control.” This solution enhances brand safety, suitability, and campaign performance within programmatic media.
The product will be officially rolled out throughout July this year, with global support from Assembly’s hubs in New York, London, Singapore, and Dubai. Assembly Control was developed in collaboration with a leading ad verification and measurement platform for digital media, with specific customization to meet Assembly’s agency needs.
Programmatic advertising accounts for over 90% of US digital display ad spend according to IAB 2024 data and is a complex channel that carries inherent risks such as ad misplacement, fraud, and brand suitability concerns. Assembly has set a target of 75% client adoption globally for Assembly Control by the end of 2025
Stagwell Inc. (NASDAQ:STGW) provides digital transformation, performance media and data, consumer insights and strategy, and creativity and communications services in the US, the UK, and internationally.
2. Rezolve AI (NASDAQ:RZLV)
Number of Hedge Fund Holders: 8
Market Capitalization as of July 16: $592.12 million
Average Upside Potential as of July 16: 105.76%
Rezolve AI (NASDAQ:RZLV) is one of the best small cap AI stocks to buy according to analysts. On June 23, Rezolve AI announced its inclusion in the Russell 2000 and Russell 3000 Indices. The inclusion follows the annual reconstitution by FTSE Russell.
Rezolve AI achieved $70 million in ARR and is now on track to surpass $100 million in ARR by year-end 2025. This growth, from a standing start to $70 million ARR in less than two quarters, is a major reason behind the company’s inclusion in these indices.
Additionally, the company has integrated its proprietary Brainpowa LLM into Microsoft Azure and is expanding its global reach through the Google Cloud Marketplace.
Rezolve AI (NASDAQ:RZLV) provides GenAI solutions for the retail and e-commerce sectors to empower retailers, brands, and manufacturers to create dynamic connections with consumers across various locations and devices.
1. Veritone Inc. (NASDAQ:VERI)
Number of Hedge Fund Holders: 6
Market Capitalization as of July 16: $80.47 million
Average Upside Potential as of July 16: 235.57%
Veritone Inc. (NASDAQ:VERI) is one of the best small cap AI stocks to buy according to analysts. As May was coming to an end, Veritone announced a multi-year agreement with the Riverside County Sheriff’s Office/RCSO.
The agreement involves the deployment of Veritone Redact software, which is a key component of its Intelligent Digital Evidence Management System (iDEMS) suite. The RCSO will use Veritone Redact to streamline the process of redacting sensitive information from audio, video, and image evidence.
Veritone is committed to AI for Good and aims to help agencies reduce manual redaction efforts.
Veritone Inc. (NASDAQ:VERI) provides AI computing solutions and services in the US, the UK, France, Australia, Israel, and India.
While we acknowledge the potential of VERI to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than VERI and that has 100x upside potential, check out our report about the cheapest AI stock.
READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.
Disclosure: None.
