In the stock market, the allure of AI stocks extends far beyond blue chips. While giants like Nvidia (NASDAQ:NVDA) dominate headlines, the street increasingly turns towards hidden gems within the AI sector. Here, the focus is on three lesser-known companies capitalizing on trends in industries with AI tech. These hidden AI stocks represent more than just a tech trend. By harnessing AI’s capabilities, these companies enhance operational efficiencies and pioneer new standards of innovation and scalability.
For instance, the first one leverages AI in national security and digital identity. Meanwhile, the second one pioneers autonomous cybersecurity solutions. Similarly, the third one expands educational access through AI-driven platforms, catering to a growing demand for personalized learning solutions. Indeed, the fundamental strengths of each company highlight its strategic positioning and growth prospects. The potential for massive returns intrigued by the future of AI makes these stocks solid investment opportunities.
BigBear.ai (BBAI)
BigBear.ai (NYSE:BBAI) specializes in AI solutions for national security and digital identity sectors. The company has affirmed a top-line guidance for 2024 of $195 million to $215 million. This reflects the company’s fundamental edge in integrating and leveraging acquisitions like Pangiam. Hence, these moves expand BigBear.ai’s market reach and offerings. Indeed, the acquisition of Pangiam strategically intensified BigBear.ai’s capabilities. These include computer vision, facial recognition, and biometrics, vital in digital identity sectors.
Further, despite a decline in Q1 2024’s top-line to $33.1 million (from $42.2 million in Q1 2023), the company maintains a solid backlog and wins new contracts. The decline emerged from specific factors like program wind-downs and revenue eliminations from bankruptcies. BigBear.ai generated a solid boost in cash balance, reaching $81.4 million as of March 31, 2024, up from $32.6 million at the end of 2023. This growth primarily stems from proceeds from warrants exercised and cash acquired from the Pangiam acquisition, bolstering the company’s financial standing and liquidity.
Overall, BigBear.ai’s acquisition strategy and focus on integrating AI make it a top lead among hidden AI stocks.
SentinelOne (S)
SentinelOne (NYSE:S) leads in autonomous cybersecurity powered by AI. The company has seen a significant 40% annual revenue growth to $186 million in Q1 fiscal 2025. This growth is complemented by an impressive gross margin of 79%. The margin returned to a record high. The company’s consistent margin expansion, with 11 consecutive quarters of over 25 points of operating margin improvement, signifies its effective cost management and scalability. Achieving positive free cash flow for the first time (18% margin in Q1) points to SentinelOne’s ability to derive cash while maintaining growth.
Moreover, SentinelOne’s leadership in autonomous cybersecurity is evident through its AI-driven security platform and innovations like Purple AI. The company’s strong customer growth metrics underscore its market acceptance and value proposition. Customers with annual recurring revenue (ARR) over $100,000 grew by 30% year-over-year, with record numbers exceeding $1 million ARR. This growth is fueled by expanding platform capabilities that drive higher ARR per customer and healthy customer expansion rates. The focus on large enterprises and the success of emerging solutions like Singularity Data Lake are driving triple-digit long-term growth.
To sum up, SentinelOne’s constant top-line growth, strong customer metrics, and operational efficiency solidify its mark among hidden AI stocks.
Nerdy (NRDY)
Nerdy (NYSE:NRDY) provides AI-powered educational platforms through its Varsity Tutors brand. The company reported an active membership of 46,100 as of Q1 2024, a significant 40% annual increase. This growth exceeded their guidance target of 45,500 members. The growth in active members is crucial, as it indicates expanding adoption and utilization of their learning memberships. This contributes significantly to revenue stability and growth. Nerdy attained quarterly institutional revenue of $11.9 million in Q1, reflecting a solid 39% annual increase. Institutional revenue constituted 22% of the company’s top-line, demonstrating sharp diversification beyond consumer subscriptions.
Additionally, in Q1 2024, Nerdy expanded access to its Varsity Tutors platform to 1.2 million students, bringing the total to 2.2 million students across over 475 school districts. This rapid scalability underscores Nerdy’s ability to penetrate new markets efficiently, leveraging institutional partnerships to achieve widespread adoption. Providing vibrant academic resources at no cost forms the plinth for upselling and expanding service offerings.
To conclude, Nerdy’s position among the top hidden AI stocks is due to its use of AI for personalized learning in the booming edu-tech sector.
As of this writing, Yiannis Zourmpanos held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.