In this article, we will look at the 7 Most Popular AI Penny Stocks Under $5 to Avoid.

The artificial intelligence (AI) revolution is here, and it is the biggest tech theme we’ve ever seen. These are Wedbush Securities’ Dan Ives’ words. Ives’ basis for this confidence is the belief that about $2 trillion will be spent on AI over the next three years. Therefore, he would rather get his money to work today rather than tomorrow to get the chance to lock in early-cycle valuations.

But Andra Capital’s Haydar Haba has a word of caution for investors. While AI stocks have grown substantially, Haba believes some companies may be overhyped. He says: “In the private markets, we are seeing hundreds of millions of dollars flow into ‘AI’ companies with no product market fit. While investors justify such investments based on growth potential, it remains unclear whether that potential can or will ever be monetized.”

Michael Brenner, a research analyst at FBB Capital Partners, holds a slightly different stance. He thinks that AI stocks are worth considering. However, only investors who can weather volatility should make this move. Brenner says he’d rather invest in mega-cap tech companies with the infrastructure to run AI models at scale. In his mind, these companies have substantial resources and the ability to commercialize AI innovations.

Our Methodology

To create this list, we used Finviz screener to find AI stocks (trading under $5 as of June 21) and picked the candidates based on negative year-to-date returns. We then ranked the stocks based on the number of hedge funds investing in them.

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).

Most Popular AI Penny Stocks Under $5 To Avoid

7. Rekor Systems Inc. (NASDAQ:REKR)

Share Price as of June 21: $1.16

Year-to-Date Returns as of June 21: -33.33%

Number of Hedge Fund Holders: 6

Rekor Systems Inc. (NASDAQ:REKR) is one of the 7 most popular AI penny stocks under $5 to avoid. On June 6, 2025, the company announced a $1.2 million contract with a Sun Belt state transportation agency to deploy 150 Rekor Discover systems. The rollout—expected to be completed in 60 days—supports a new state initiative to enhance traffic planning and operations with Rekor’s Data-as-a-Service model.

These AI-powered roadside systems provide detailed, privacy-protected per-vehicle data while eliminating the need for intrusive road sensors. Compliant with Federal Highway Administration standards, the technology aims to modernize traffic monitoring while improving worker safety and reducing road disruptions.

According to Rekor leadership, the deployment represents a significant step in transforming legacy infrastructure into a scalable, global platform. With an expanding footprint in several U.S. states and growing international interest, Rekor is poised to lead a broader shift toward smarter traffic intelligence solutions.

Rekor Systems Inc. (NASDAQ:REKR) develops cutting-edge roadway intelligence solutions using AI, machine learning, and computer vision. Headquartered in the U.S., the company’s platforms power data-driven traffic planning and operations for government and commercial clients worldwide.

6. Richtech Robotics Inc. (NASDAQ:RR)

Share Price as of June 21: $1.79

Year-to-Date Returns as of June 21: -33.70%

Number of Hedge Fund Holders: 7

Richtech Robotics Inc. (NASDAQ:RR) is another company on the list of the 7 most popular AI penny stocks under $5 to avoid. On June 17, Richtech announced that its AI-powered robot, ADAM, has surpassed the milestone of serving 16,000 drinks at its flagship Clouffee & Tea location in Town Square, Las Vegas.

ADAM is equipped with proprietary AI software that runs on NVIDIA’s chipset. The proprietary vision-AI technology allows the robot to monitor each cup in real-time. As such, it can adjust pour angles, flow rate, and timing for millimeter-level accuracy. Additionally, the robot can engage customers, suggest beverages, and execute complex recipes precisely and quickly.

According to Matt Casella, President of Richtech Robotics, surpassing 16,000 drinks served is a “compelling validation of ADAM’s real-world performance and commercial viability.” He emphasized that ADAM delivers a faster, smarter, and more engaging customer experience. This aligns with the company’s objective to transform service models in food and beverage.

Richtech Robotics Inc. (NASDAQ:RR) is a Nevada-based provider of AI-driven service robots. It specializes in the service industry, including the hospitality and healthcare sectors. The company designs, builds, and sells robots for food and beverage service, indoor delivery, and cleaning. Leading products so far include Matradee, ADAM, Titan, and DUST-E.