We recently published a list of 12 Cheap AI Stocks to Buy in 2025. In this article, we are going to take a look at where Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) stands against other cheap AI stocks to buy in 2025.

Artificial Intelligence (AI) was a buzzword around Wall Street for most of 2024. AI has shown immense promise but comes with significant risks. Big AI players are dominating the broader market, but there will be opportunities for other companies to explore as the AI market continues to expand. For instance, the new administration is keen on technological advancement, and recently, President Donald Trump announced a $500 billion AI initiative, a joint venture known as Stargate between OpenAI, Softbank, and Oracle.

However, DeepSeek’s introduction shocked the U.S. companies after it released a new AI model, a much better alternative to GPT-4. DeepSeek claims to have designed the AI model in just two months and at around under $6 million using Nvidia’s less-advanced H800 chips, as reported by Reuters on January 27. Since the news broke out, NVIDIA Corporation (NASDAQ:NVDA) shares have plunged over 16%, wiping away $600 billion in market capitalization, the biggest one-day loss in U.S. history.

Moor Insights & Strategy founder, CEO, and chief analyst Patrick Moorhead, speaking to Market Domination, shared his views on DeepSeek. Moorhead was impressed by the efficiency of DeepSeek’s AI. He pointed out that the Chinese have used different techniques compared to American developers, where they were able to parse or train maybe 5% of the data, which is a 95% reduction.

However, Moorhead also addressed the U.S. market drop as an “overreaction.” “I think the market overall should be going crazy because [this is the] uplift of what we were looking for [from AI],” said Moorhead. He added that the investors’ focus should be on the progress in inference.

It might be a good time to invest in AI stocks, especially cheap AI stocks during the market’s overreaction.

Our Methodology

To determine the list of cheap AI stocks, we went through various news articles and stock analyses. We shortlisted the AI stocks with the minimum analyst upside of 30%, as of January 27. Cheap, in the context of this article, means stocks that Wall Street analysts believe are undervalued and will surge to higher share prices. We have ranked the cheap AI stocks to buy based on their popularity among hedge funds, as of Q3 2024, in ascending order.

Why do we care about what hedge funds do? 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).

A pharmacist in a hospital pharmacy stands next to a row of various drug containers.

Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)

Analyst Upside (as of January 27): 49.36%

No. of Hedge Fund Holders: 16

Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is a clinical-stage biotechnology company focused on decoding biology by integrating technological advancements across biology, chemistry, data science, automation, and engineering to industrialize drug discovery.

Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) became a popular AI stock following NVIDIA’s $50 million investment in the biotech firm in 2024. The company will use NVIDIA’s DGX™ Cloud and other AI tech stack for drug discovery. Recursion is now focusing on AI products and recently acquired AI biotech startup Exscientia. According to a 2023 PwC report, the AI market in healthcare was valued at $11 billion and is expected to reach $188 billion by 2030. Recursion is being considered a promising AI drug company that would benefit from that.

On January 8, KeyBanc Capital Markets analyst Scott Schoenhaus maintained its Overweight rating on RXRX shares with a price target downgrade from $12 to $10. Schoenhaus notes that healthcare technology stocks were under pressure for most of 2024 but experienced a rebound following the U.S. elections. Analysts are still bullish on RXRX following its purchase of Exscientia.

With the acquisition, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) now holds a pipeline with over 10 clinical and preclinical programs, 10 advanced discovery programs, and over 10 partnered programs. Most programs target oncology and rare diseases, and could potentially achieve annual sales of more than $1 billion each. Recursion projects nearly 10 clinical program milestones within the next 18 months.

J.P. Morgan also weighed on RXRX and highlighted that the biotech company’s presentation updates at its recently held healthcare conference were “largely in line/as anticipated.” Analysts expect Recursion Pharmaceuticals to achieve definitive clinical wins.

Overall, RXRX ranks 11th on our list of cheap AI stocks to buy in 2025. While we acknowledge the potential of RXRX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RXRX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.