We recently The 11 Best AI Penny Stocks to Invest In Now In this article, we'll show you AI penny stocks worth considering if you missed out on buying NVIDIA Corporation (NASDAQ:NVDA) when it was trading at under $500 per share at the beginning of the year.
It's no secret that semiconductors are a top investment for anyone looking to invest in the burgeoning field of artificial intelligence. NVIDIA Corporation (NASDAQ:NVDA) shares have soared more than 150% over the past year. This growth is almost entirely due to increased demand for the company's graphic processing units (GPUs), which are ideal for processing the massive amounts of data required for various AI and machine learning applications.
Amid this strong performance, NVIDIA Corporation (NASDAQ:NVDA) was included in the group of large publicly traded companies known as the “Magnificent Seven.” However, as the AI boom continues, NVIDIA Corporation (NASDAQ:NVDA) is expected to continue to deliver solid returns to investors. Now, Goldman Sachs has raised its target price for the company. Analyst Toshiya Hari raised his target price from $1,000 to $1,100 and reiterated his “buy” rating. In a research note, the analyst noted that NVIDIA Corporation's (NASDAQ:NVDA) stock is trading at an attractive valuation due to the company's continued growth.
Strong fundamentals suggest that NVIDIA Corporation (NASDAQ:NVDA) is a good choice for risk-averse investors looking for solid long-term returns. So it's no surprise that the stock is one of the most popular among the hedge funds tracked by Insider Monkey. According to the latest 13F filings, 186 of the 920 hedge funds tracked by Insider Monkey were bullish on NVIDIA at the end of March. We follow this metric because our research shows that mimicking the top picks of the best hedge funds can help you outperform the market. Our quarterly newsletter strategy selects 14 small and large stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points (Click here for details).
Navitas Semiconductor Enters the Market
However, for investors who can tolerate risk, we recommend considering Navitas Semiconductor Corp (NASDAQ:NVTS). Like NVIDIA, Navitas is also a semiconductor stock, but it's currently trading at less than $4 per share, making it one of the best AI penny stocks to buy right now. While it may not reach the scale of NVIDIA Corporation, it's worth remembering that in 2014, NVIDIA was trading at less than $5 per share.
Navitas Semiconductor Corp. (NASDAQ:NVTS) is a small cap company focused on power semiconductors, including gallium nitride power integrated circuits and silicon carbide power devices. Essentially, it develops semiconductors that are used to power a variety of devices. As such, Navitas' products are used in a wide range of applications, including mobile phones, laptops, and home appliances. Additionally, Navitas supplies semiconductors to several fast-growing industries, including data centers, electric vehicles, and solar inverters. Some of the company's customers include Dell, Lenovo, Xiaomi, Amazon, OPPO, and Motorola. Most of the company's products currently shipped are used in chargers for mobile devices.
A technician in a clean lab concentrating on designing a new semiconductor chip.
Financially, Navitas is in good shape. The company has seen strong revenue growth over the past few quarters. In the first quarter of 2023, Navitas Semiconductor Corp. (NASDAQ:NVTS) revenues increased 73% to $23.2 million. The company has seen solid sales growth over the past few quarters. However, costs are also quite high and Navitas has yet to report a profitable quarter. In the first quarter, Navitas posted a net loss of $0.02 per share, which is significantly lower than the loss of $0.39 a year ago. First-quarter revenue and net loss beat analyst expectations of $22.92 million and a loss of $0.15 per share, respectively.
Navitas as a pick and shovel AI play
Despite revenue growth and the potential for further revenue growth, Navitas Semiconductors Corporation (NASDAQ:NVTS) shares have fallen 48% since the beginning of the year. This is not a good situation to be in when most semiconductor stocks are rising. One reason for the decline was explained by the company's CEO, Gene Sheridan, on CNBC.
“We're not currently shipping to AI and our stock price reflects that,” Sheridan said.
But the CEO added that Navitas plans to change that soon. The company plans to develop and sell power chip technology that can be used to power AI-focused data centers. The company is developing a power platform that can provide higher power output to meet the demands required by AI processors such as NVIDIA's Grace Hopper H100 and the recently announced Blackwell chips. These chips require 700W to more than 1,000W of power, significantly more than the 300W required by traditional CPUs. Navitas said it has about 30 customer projects in development and expects its power chips to be used in the data centers of Amazon.com, Inc.'s (NASDAQ:AMZN) AWS, Microsoft Corporation's (NASDAQ:MSFT) Azure, Alphabet Inc's (NASDAQ:GOOGL) Google and Baidu Inc's (NASDAQ:BIDU).
Check out our report Cheapest AI Stocks Then, find a company that has as much potential as Microsoft, but whose stock price is less than five times Microsoft's revenue.
What smart money and the sell-side think about Navitas
As mentioned above, we believe Navitas Semiconductors Inc. (NASDAQ:NVTS) is one of the best AI penny stocks to buy right now, based on hedge fund sentiment. As of the end of March, there were 11 funds in our database that were bullish on the stock, down from 18 a quarter ago. As of the end of March, these funds held $80 million worth of shares.
Analysts also see general upside potential for Navitas Semiconductors Inc. (NASDAQ:NVTS). Following the company's May earnings release, four analysts reiterated their buy recommendation on the stock but lowered their price targets. Of these, the highest price target is currently at Rosenblatt Securities, at $10. Three analysts at Robert W. Baird, Needham & Company LLC and Deutsche Bank have set a price target of $7.00. Meanwhile, analysts at Jefferies downgraded the stock from “buy” to “hold” and lowered their price target to $4.00.
In conclusion, Navitas Semiconductors Corporation (NASDAQ:NVTS) is a penny stock worth considering. The company is developing, but lagging behind, to gain more exposure to the AI sector. However, it has a broad pipeline of applications across various sectors that could allow it to achieve further growth in other areas. For example, in the automotive space, Navitas Semiconductors Corporation (NASDAQ:NVTS) is set to start producing chips for EV chargers, and its customers include some of the biggest names, such as Volvo, Smart, and Zeeker Intelligent Technology Holding Limited (NYSE:ZK).
If you want to know which AI stocks under $5 that the smart money is bullish on, check out our free report. The 11 Best AI Penny Stocks to Invest In Now.
If you're looking for AI stocks that have better prospects than Micron but trade at less than five times earnings, check out our report. Cheapest AI Stocks.
Read next: Michael Burry is selling these stocks and Jim Cramer is recommending these stocks.
Disclosures: None. This article originally appeared on Insider Monkey.
