On August 29, Drew Matus, MetLife Investment Management chief market strategist, joined ‘The Exchange’ on CNBC to discuss the impact of AI on the job market. He stated that the real impact of AI will take place over the next decade, not next year. Matus’s investment thesis focuses on the longer-term opportunities in both technology and financial sectors, arguing that investment, rather than consumption, is the more likely source of future growth. His investment thesis is rooted in the belief that we need to invest in the future of technology. However, he also introduced a cautionary note: if you look at the top companies in America 30 years ago versus today, there is almost no overlap. He stressed the importance of keeping an eye on “AI native” companies that may displace older, more established companies. He also suggested that it is crucial to observe how well existing companies adapt to AI as a potential threat to their structure.
Earlier on August 25 as well, Steve Levy, Wired editor-at-large, joined CNBC’s ‘Squawk Box’ to discuss the state of AI valuations, as they have been noted to be extremely high. Levy explained that this upward trend is hard to stop because operating these AI businesses requires vast amounts of capital for computation, data, and talent. He stated that the prevailing belief is that AI will drive the entire tech sector and the world to new heights, so no one is bailing on AI. He conceded that a reckoning is inevitable because not all companies will be able to generate the revenue to justify their valuations in the long term, but for now, the ride continues. Levy also mentioned that a potential AI bubble pop would affect private markets more because the larger, publicly listed tech companies, while investing heavily in AI, are still fully developed businesses. Whereas, the high valuations of private AI companies are driven purely by the desire of investors to get in on the trend.
That being said, we’re here with a list of the 7 best small cap AI stocks to invest in according to hedge funds.
Our Methodology
We used the Finviz stock screener to compile a list of the top small cap AI stocks that were trading between $300 million and $2 billion. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2025.
Note: All Data was Sourced on September 18.
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).
7 Best Small Cap AI Stocks to Invest in According to Hedge Funds
7. Richtech Robotics Inc. (NASDAQ:RR)
Market Capitalization as of September 18: $673.02 million
Number of Hedge Fund Holders: 5
Richtech Robotics Inc. (NASDAQ:RR) is one of the best small-cap AI stocks to invest in according to hedge funds. On September 16, H.C. Wainwright analyst Scott Buck reiterated a Buy rating on Richtech Robotics while setting a price target of $3.50. Earlier in August, the company reported a loss of $4.1 million, or $0.04 per share, for Q3 2025.
Over the four quarters leading up to this report, Richtech has not been able to surpass consensus EPS estimates. This quarterly loss of $0.04 per share compares to a loss of $0.02 per share announced a year ago. The company’s revenue for the period was $1.2 million, which was lower than estimates. However, the company secured several business deals in Q3. These deals are expected to increase the company’s Q4 revenue and drive future recurring revenue.
The most recent one is a sales agreement, valued at over $4 million, with Beijing Tongchuang Technology Development Co., Ltd., which was announced on September 11. This deal is for the purchase and provision of services related to the company’s three product lines and is also expected to positively impact Q4 revenues.
Richtech Robotics Inc. (NASDAQ:RR) develops, manufactures, deploys, and sells robotic solutions for automation in the service industry in the US. The company offers indoor transport & delivery, sanitation, and food & beverage automation solutions.
6. Rezolve AI (NASDAQ:RZLV)
Market Capitalization as of September 18: $1.68 billion
Number of Hedge Fund Holders: 8
Rezolve AI (NASDAQ:RZLV) is one of the best small cap AI stocks to invest in according to hedge funds. On September 11, Rezolve AI announced the launch of its Visual Search capability. The transformative feature replaces traditional keyword search with a system powered by Rezolve’s proprietary vision models and GenAI, which enables consumers to instantly search a retailer’s catalog by pointing their phone camera at any item, uploading a photo, or using a screenshot.
The new technology is designed to collapse the gap between inspiration and purchase, which Rezolve terms Conversational Commerce. Instead of guessing product names or model numbers, customers can show what they want and engage in a natural-language and dialogue-like shopping experience. The system uses multimodal AI for both image and text/semantic understanding to interpret complex attributes like material, pattern, color, and style.
The Visual Search functionality integrates with Rezolve’s existing Brain Commerce and Brain Checkout platforms. Results from the visual discovery are presented with contextual prompts and suggestions, which lead customers directly to personalized recommendations and the one-tap checkout process, thereby building a closed-loop Conversational Commerce ecosystem.
Rezolve AI (NASDAQ:RZLV) provides GenAI solutions for the retail and e-commerce sectors. Its platform empowers retailers, brands, and manufacturers to create dynamic connections with consumers across various locations and devices.
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