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.
A computer screen showcasing Artificial Intelligence and Machine Learning algorithms at work.
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.
5. Perfect Corp. (NYSE:PERF)
Share Price as of June 21: $2.01
Year-to-Date Returns as of June 21: -28.98%
Number of Hedge Fund Holders: 10
Perfect Corp. (NYSE:PERF) is one of the 7 most popular AI penny stocks under $5 to avoid. On June 11, Perfect revealed a “groundbreaking” partnership with Nvidia (NASDAQ:NVDA) to enhance its suite of next-generation beauty and fashion technology solutions. Specifically, Perfect will integrate Nvidia’s AI and accelerate computing platforms into its products. According to Perfect, this integration will help to deliver hyper-personalized experiences with unparalleled realism, accuracy, and speed in the beauty and fashion industries.
Perfect’s AI Skincare solution uses deep-learning AI models trained on over 70,000 medical-grade images to detect up to 15 skin conditions in real time. It is optimized with NVIDIA TensorRT for lightning-fast runtime performance. On the other hand, YouCam Online Editor offers Generative AI features, including AI Hairstyle Generation and AI Video Face Swap. This, too, leverages NVIDIA TensorRT, which optimizes generative diffusion models for real-time creation of personalized hairstyles, face swaps, and clothing try-ons.
Thus, integrating Nvidia’s technology into the solutions addresses several critical challenges. The main ones are achieving true-to-life color representation and adapting to diverse skin tones and types.
Perfect Corp. (NYSE:PERF) is an AI and augmented reality software company headquartered in New Taipei City, Taiwan. The firm creates digital solutions for the beauty, fashion, and skincare industries. Its key products include the YouCam app suite and the WANNA virtual try-on platform.
4. Lantronix, Inc. (NASDAQ:LTRX)
Share Price as of June 21: $2.52
Year-to-Date Returns as of June 21: -38.83%
Number of Hedge Fund Holders: 13
Lantronix, Inc. (NASDAQ:LTRX) is one of the 7 most popular AI penny stocks under $5 to avoid. Lantronix made public a collaboration with Aerora on June 17, whose goal is to develop advanced Edge AI solutions for drones, robotics, and surveillance applications. Aerora provides integrated National Defense Authorization Act (NDAA)-compliant propulsion, ground control, and AI-powered precision payload systems.
The partnership results in a solution that integrates three powerful technologies: Lantronix’s Open-Q System-on-Module (SoM) will be the core; Aerora’s OEM platform will provide AI-powered visual navigation; and Teledyne FLIR Hadron 640R module and Prism software (integrated into Aerora’s solution) will enable advanced thermal and RGB imaging capabilities.
According to Lantronix, the new solution will offer simultaneous 4K video streaming alongside high-resolution thermal video. It will also provide AI-driven situational awareness and real-time decision-making. To top it off, the solution is designed to be NDAA-compliant from the outset.
The solution will accelerate advancements in intelligent applications and provide developers with cutting-edge tools from leading embedded compute technologies. Users will also enjoy reduced development timelines and engineering overhead for drones and robotics.
Lantronix, Inc. (NASDAQ:LTRX) is a technology company that provides secure connectivity and management solutions for Internet of Things (IoT) and IT systems. It offers hardware, software, and cloud-based services that help businesses collect, process, and manage data from connected devices. Leading products include embedded IoT modules, edge computing systems, power-over-Ethernet (PoE) devices, and remote management tools.
3. 8×8, Inc. (NASDAQ:EGHT)
Share Price as of June 21: $1.75
Year-to-Date Returns as of June 21: -34.46%
Number of Hedge Fund Holders: 16
8×8, Inc. (NASDAQ:EGHT) is one of the 7 most popular AI penny stocks under $5 to avoid. On June 17, the company announced the conclusion of share repurchase activity, which it deems part of its capital allocation strategy. The company bought one million shares of its common stock for an aggregate price of around $1.85 million. Further details show that these transactions occurred in the open market between June 6, 2025, and June 13, 2025.
According to the official statement, the repurchases were executed under an existing share repurchase program authorized by the company’s Board of Directors in 2017. Also, this particular activity is the first time 8×8 has repurchased equity not associated with a financing activity since October 2017.
The company said the repurchases have three key objectives. First, to manage dilution from employee equity and stock purchase programs over time. Second, to return value to investors. Third, optimize the company’s capital structure through disciplined capital allocation.
8×8, Inc. (NASDAQ:EGHT) is a cloud communications company. It provides voice, video, chat, and contact center solutions through its unified communications-as-a-service (UCaaS) and contact center-as-a-service (CCaaS) platforms. Key offerings include 8×8 Work, 8×8 Contact Center, and 8×8 Engage, which help businesses manage internal collaboration and customer engagement across digital channels.
2. Vuzix Corporation (NASDAQ:VUZI)
Share Price as of June 21: $2.88
Year-to-Date Returns as of June 21: -26.90%
Number of Hedge Fund Holders: 17
Vuzix Corporation (NASDAQ:VUZI) is one of the 7 most popular AI penny stocks under $5 to avoid. On June 16, the company received a $5 million second tranche investment from Quanta Computer, a global Original Design Manufacturer (ODM) and strategic partner.
This latest investment brings Quanta’s total investment in Vuzix to $15 million, although the total anticipated investment from the company is $20 million. According to Vuzix, this latest capital injection “strengthens” the partnership between Vuzix and Quanta and “expands” Vuzix’s waveguide production capabilities. The investment was made in the form of a convertible note with a conversion price of $8.00 per share.
Meanwhile, Vuzix has successfully achieved its waveguide production and yield targets. The company successfully scaled its proprietary waveguide manufacturing process to meet the growing demand for its solutions. This milestone is crucial for enhancing the company’s state-of-the-art waveguide manufacturing capabilities. Vuzix said that the capital injection and the achievement of a key milestone position it to deliver affordable, lightweight, and performance-driven AI smart glasses for mass-market adoption.
Vuzix Corporation (NASDAQ:VUZI) is a New York-based technology company. It designs and sells smart glasses and augmented reality (AR) products. Some of its products already in the market include wearable display devices like the Vuzix Blade, M Series, Shield, and Z100, as well as waveguide optics and display engines. The company also provides engineering services and OEM/ODM solutions.
1. Unisys Corporation (NYSE:UIS)
Share Price as of June 21: $4.15
Year-to-Date Returns as of June 21: -34.44%
Number of Hedge Fund Holders: 23
Unisys Corporation (NYSE:UIS) is one of the 7 most popular AI penny stocks under $5 to avoid is Unisys Corporation (NYSE: UIS). On June 16, Unisys announced the pricing of its previously announced private offering of $700 million aggregate principal amount of Senior Secured Notes due 2031. This is a private offering extended to persons reasonably believed to be qualified institutional buyers.
According to Unisys, the notes will be issued at par and carry an annual interest rate of 10.625%. The interest is payable semi-annually on January 15 and July 15, starting from January 15, 2026. The offering is anticipated to close on June 27, 2025, subject to customary closing conditions.
Unisys intends to use the net proceeds from this offering to finance a cash tender offer and consent solicitation for all of its existing notes worth $485 million. The notes are due November 1, 2027. The proceeds will also cover related premiums, fees, and expenses, while another portion is earmarked to partially fund the company’s U.S. pension plan deficit and postretirement liabilities. The remaining funds, if any, will be used for general corporate purposes.
Unisys Corporation (NYSE:UIS) is an information technology company that provides digital workplace, cloud, and enterprise computing solutions. It operates through three segments: Digital Workplace Solutions (DWS), Cloud, Applications & Infrastructure (CA&I), and Enterprise Computing Solutions (ECS). Its offerings include IT support services, cloud migration, cybersecurity, and ClearPath Forward.
While we acknowledge the potential of UIS as an investment, 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 UIS and that has 100x upside potential, check out our report about the cheapest AI stock.
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