Welcome to Episode #425 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey is joined by Mark Zinski, Zacks Senior Microcap Analyst, to talk about investing in small cap AI revolution stocks.
Are there any publicly traded small cap companies in the AI industry?
Should investors be seeking out small caps in this space or sticking with the large cap companies?
What are the risks, and rewards, of investing in the small cap AI stocks?
How Do You Find Small Cap AI Stocks?
The chip companies are mostly large caps but even if you look outside of the chips to the companies building and cooling the data centers, they are mostly mid and large cap companies.
However, there exists at least 2 small cap companies that are in the AI trade. The way to find these companies, and more like them, is by deploying the Zacks Rank.
Top Zacks Ranked stocks normally see rising earnings estimates. If a small cap company has at least one analyst on it, it may have a top Zacks Rank. Historically, the Zacks Rank has been a useful tool for finding small cap hidden gems.
Additionally, research firms like Zacks may be doing independent research reports on some of these small cap companies.
Mark has the inside scoop on the small cap world. Here are two stocks he says to watch.
2 Small Cap AI Revolution Stocks for Your Watch List
1. Innodata Inc. (INOD)
Innodata is a global data engineering company. Data is in demand with AI. Innodata has a market cap of just $1.2 billion.
Shares of Innodata have surged 153% over the last 3 months. It does have a Zacks Rank, as Zacks.com has one earnings estimate. Innodata is a Zacks Rank #1 (Strong Buy).
That’s the top Zacks Rank which only 5% of all Zacks Ranked stocks are in on any given day.
Innodata is expected to make $0.75 per share in 2024. Because it has positive earnings, it has a price-to-earnings ratio (P/E). It’s not cheap. Innodata has a forward P/E of 59.
Should Innodata be on your watch list?
2. TSS, Inc. (TSSI)
TSS, Inc. is a data center services company that integrates AI and other computing infrastructure and software. TSS, Inc. has a market cap of just $179 million.
In the third quarter, TSS signed a multi-year deal with one of its largest customers to provide integration services for AI-enabled racks. Due to anticipated volume and power demands, TSS also announced it was relocating to a new, larger facility in the same area in 2025.
Shares of TSS have fallen 34% in the last month. It does not have a Zacks Rank as Zacks.com doesn’t have any analyst data on the company yet.
Should TSS, Inc. be on your watch list?
[In full disclosure, Mark owns shares of INOD and TSSI in a family portfolio.]
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Innodata Inc. (INOD) : Free Stock Analysis Report
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Zacks Investment Research
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