In this article, we will be taking a look at 11 penny stocks that will make you a millionaire.

Why Should You Invest in Penny Stocks?

Penny stocks are often overlooked by most investors. These are the smallest of the small companies operating in the market, and so they typically lose out on being covered in detail by financial reporters and analysts. However, because of this conundrum, many penny stocks end up becoming excellent under-the-radar investments for those investors who don’t mind a bit of risk. This is especially the case for penny stocks operating in the artificial intelligence space today. This isn’t to say that penny stocks offer a sure-shot way of making big profits at all times, though. Since these stocks are of companies that are incredibly small relative to the usual players we hear about in the market news, they are also incredibly risky to invest in – as such, investing in penny stocks is a move that only investors with a tolerance for high-risk, high-reward strategies should make.

In the current market landscape, there may be more room to consider investing in smaller companies. This is because of the potential September rate cut from the Fed. Financial professionals are considering this potential cut to be a catalyst for the growth of smaller companies in the market, which have been largely left ignored over the past two years since the Fed’s policy has been so tight. So a rate cut in September may actually result in an overall growth cycle emerging for smaller players in the market.

Read Also: 7 Most Popular AI Penny Stocks Under $5 and 10 Best Technology Penny Stocks to Invest In Right Now.

How’s The Market Looking For Smaller Stocks Today?

On August 21, Tom Lee, co-founder of Fundstrat Global Advisors, joined CNBC’s “Closing Bell Overtime” to discuss this very development. He noted that as the Fed is starting to normalize its policy and as merger activity in the US is beginning to accelerate, smaller companies are becoming increasingly more poised to benefit. Lee also added that there’s a misconception in the market that smaller companies are growing, or at least have the tendency to, grow slower than bigger companies. In fact, he noted that the small cap index has a median earnings growth that is almost 700 basis points faster than the broader market index, while top-line growth is almost 400 basis points faster. Lee also said the following:

“For small caps to rise 40% means that the P/E, the median Russell 2000 stock goes from 10x to 14x. So, it’s not asking the market to provide some magic and a huge re-evaluation… [With small-caps] you’re getting better growth, lower valuation, and I think the catalyst is now that the market is convinced that the Fed is embarking on a rate cutting cycle.”

According to Lee, money that’s been on the sidelines over the past few years because of the Fed’s rate policy could now potentially funnel into smaller companies because they offer a good risk-reward balance to investors now. Because of these developments, we’ve compiled a list of some of the smallest stocks trading on the market today by going through five months’ worth of articles on Stock Gumshoe, a financial analysis website that offers unique insights into what some call “secret stocks,” which have been going largely ignored by most investors.

Our Methodology 

We read Stock Gumshoe articles from April to August of 2024 and then selected the penny stocks that have promising futures ahead of them. The stocks are ranked in ascending order of the number of hedge funds holding stakes in them as of the end of the second quarter of 2024, according to Insider Monkey’s hedge fund data.

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 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

11 Penny Stocks That Will Make You A Millionaire

11. GSI Technology, Inc. (NASDAQ:GSIT)

Number of Hedge Fund Holders: 1

GSI Technology, Inc. (NASDAQ:GSIT) is a semiconductor company based in Sunnyvale, California. It offers associative processing unit products focusing on applications using similarity search in visual search queries for e-commerce, computer vision, drug discovery, cyber security, and service markets.

Keith Kohl has teased a stock as being the one that can kill NVIDIA in AI, in his Technology and Opportunity letter. Here are some of Kohl’s comments:

“This company from Sunnyvale developed a patent-protected chip that blows its competitors out of the water. You see, AI apps require almost infinite data-crunching, and this firm’s flagship chip outperforms other chips by a factor of 100 on big-data workloads. And that’s not all. These chips also consume far less power. Take Nvidia’s A100. It devours 400 watts of electricity. However, this firm’s chip runs on only 60 watts. That’s 85% less power consumption. This kind of performance slashes the cost of running AI systems radically and unleashes AI’s true potential. This firm’s customers include tech and defense giants like Lockheed Martin, Cisco, General Dynamics, Honeywell, Nokia, Raytheon, and Rockwell. Yet hardly any retail investors know this company’s name. But that’s all going to change soon because I believe this firm is about to dominate the entire AI sector. Like I said, this could be a replay of Nvidia’s incredible 12,035% surge….”

Stock Gumshoe’s Travis Johnson seems to think that this teaser most aptly relates to GSI Technology, Inc. (NASDAQ:GSIT). For the first quarter of fiscal 2025, GSI Technology, Inc. (NASDAQ:GSIT) reported net revenues of $4.7 million and net income of $1.1 million. This stock is expected to grow immensely and may turn its investors into millionaires because of its patent-protected technology that could give even chip-giant NVIDIA a run for its money.

One hedge fund was long GSI Technology, Inc. (NASDAQ:GSIT) in the second quarter, with a total stake value of $677,000

10. Lantern Pharma Inc. (NASDAQ:LTRN)

Number of Hedge Fund Holders: 4

Lantern Pharma Inc. (NASDAQ:LTRN) is a clinical-stage biotech company based in Dallas, Texas. It focuses on AI, machine learning, and genomic data to streamline the drug development process.

Ray Blanco has teased this stock as one of his top three picks in the Catalyst Trader Newsletter. Here’s the pitch for this stock:

“If you were to invest in only three companies over the next decade, these are the superstars you would want in your portfolio. All three could be up at least 500% in the next year… One of the most promising is only $45 million, and they already have an AI-developed drug rushing through clinical trials, with huge catalysts occurring in the first quarter of 2025.”

Stock Gumshoe seems to think that the $45 million company is most likely Lantern Pharma Inc. (NASDAQ:LTRN), which has three drugs in clinical trials: LP-184, 284, and 300. The company has also entered into several beneficial partnerships, one with Oregon Therapeutics, and another with Starlight Therapeutics.

With all this lined up, Lantern Pharma Inc. (NASDAQ:LTRN) does seem to be an exceptional penny stock play in the biotech sector, especially because of its focus on AI in drug development. In 2023 alone, Lantern Pharma Inc. (NASDAQ:LTRN) ensured the advancement of its radar AI platform, which reached over 60 billion data points in 2023 and is now on the path to reaching over 100 billion data points in 2024.

Four hedge funds held stakes in Lantern Pharma Inc. (NASDAQ:LTRN) in the second quarter, with a total stake value of $610,000. Renaissance Technologies was the most prominent shareholder in the company, holding 81,800 shares.

9. Exscientia Plc (NASDAQ:EXAI)

Number of Hedge Fund Holders: 6

Exscientia Plc (NASDAQ:EXAI) is another biotech player on our list. It is based in the United Kingdom and operates as an AI-driven pharma-tech company that engages in the design and development of differentiated medicines for diseases with high unmet patient needs.

Alexander Green released a stock teaser in The Communique, which is the entry-level newsletter from The Oxford Club, that Travis Johson from Stock Gumshoe believes was alluding to Exscientia Plc (NASDAQ:EXAI). The teaser noted that there are seven stocks set to become the next Magnificent Seven. On the stock that’s thought to be Exscientia Plc (NASDAQ:EXAI), Green commented:

“… a short while ago the French drug giant Sanofi entered into a $283 million partnership with the company. But now they are going bigger. Sanofi recently agreed to pay the company up to $5.2 billion to develop 15 oncology and immunology drugs. The company will receive $100 million up front as well as milestone payments from successful treatments. They also have a collaboration with Merck on three potential “best-in-class” drug targets worth up to $674 million. It signed a major $1.2 billion partnership with Bristol Meyers Squibb.”

Exscientia Plc (NASDAQ:EXAI) is certainly gaining popularity because it’s thought to be leading the charge in treating cancer with AI. The company is expected to hit the $7.5 billion mark in revenue within the next 12 months because of the partnerships Green mentioned in the comment above, and the fact that Exscientia Plc (NASDAQ:EXAI) is lining up massive amounts of funding for its operations through such collaborations so it can have enough free cash annually to turn a profit.

There were six hedge funds long Exscientia Plc (NASDAQ:EXAI) in the second quarter, with a total stake value of $50.9 million. MIC Capital Partners was the largest shareholder in the company, holding 1,542,600 shares.