Pretty much every company affiliated with AI has seen its stock deliver explosive gains over the past two years at some point. The AI rally has slowed down to some extent if you look at the big-cap stocks, but the focus is now on the smaller AI companies as investors target outsized gains. You’ll find plenty such overlooked AI stocks that have huge potential, and as these stocks get more eyeballs on Wall Street, the stock could go parabolic.
Triple-digit gains from these AI stocks should be more than enough to outperform Nvidia (NASDAQ:NVDA). NVDA stock has “only” delivered 7% in gains over the past six months, and it no longer has the potential to print generational wealth. These three stocks might be worth looking into if that is what you’re interested in:
Appian Corp (NASDAQ:APPN) is a cloud computing and enterprise software company that has been lagging most of its peers since it declined after an initial surge in 2021. Its cash burn increased and it was forced to take in increasing amounts of debt, which sat at $320 million vs. $140 million in cash in Q3.
However, I think it can make a turnaround as the AI rally is starting to generate lift for most cloud companies and this is helping the company move towards breakeven. EPS is expected to turn positive this year along with low double-digit sales growth continuing. Q4 results also came in great, with $166.69 million in revenue beating the $164.31 million consensus by 2.38% and non-GAAP eps coming in at breakeven, whereas analysts expected a loss of a cent.
2025 adjusted EPS guidance also came in significantly above analyst estimates. The company expects $0.17 to $0.22 vs. the consensus estimate of $0.12. The revenue guidance came in slightly below expectations, but I’m particularly bullish here due to the cloud metrics it is posting.
Appian’s cloud subscription revenue increased 19% year-over-year to $98.9 million and the cloud subscription retention rate was 116%. Full-year cloud subscription revenue increased 21% year-over-year to $368 million, and the cloud strength here is starting to offset the weakness in other parts of the business. I’d argue if the cloud segment traded as a standalone business, it’d be valued more than than sum of its parts given how richly cloud companies trade. If it keeps executing well, there’s a good chance it could deliver parabolic gains like it did in 2021.
Hackett Group (NASDAQ:HCKT) is a strategic consultancy company that is now increasingly focusing on generative AI and automation. Most companies are trying to integrate AI into their processes, and most of them probably don’t have the know-how to do that. The Hackett Group has products and personnel to guide them through it. For example, it has its AI XPLR platform to assess AI readiness.
In Q4, it surpassed both the top and bottom-line guidance. It reported $79.2 million in revenue, up from $72.4 million in the year-ago quarter. Adjusted EPS increased to $0.47 and it also increased its annual dividend by 9%. The company expects the growth to continue and guides for revenue between $75 million to $76.5 million in Q1 2025. EPS is expected at $0.4 at the midpoint. The stock is already up 46.2% in the past year due to AI driving great quarterly results.
This growth isn’t stellar when you compare it to other software companies, but I think this company could be ahead of its time in the sense that there still isn’t a big rush of companies that are trying to take advantage of generative AI. That’s because generative AI is still pretty unreliable. However, if you think that AI is going to get progressively better to the point where companies will start integrating AI in droves, HCKT seems like a good bet.
The dividend yield here is 1.31%
I’ve put Alpha Technology Group (NASDAQ:ATGL) as it is a company that is still quite speculative. It posted 101.2% in revenue growth to HKD 3.2 million in Q3 2024, but it remains unprofitable.
I still think it’s a good buy though since it is one of the only Chinese companies you can buy to bet on China’s cloud and AI industry. Alpha Technology group offers cloud-based IT solutions and AI solutions, like its Optical Character Recognition (OCR) technology that can extract data from documents with over 98% accuracy, along with predictive analytics modules that can be integrated into CRM/ERP systems to optimize supply chains.
The stock has been delivering stellar returns recently and I think the AI hype could drive it much higher, especially if the top line continues to grow at its current pace. China is just starting to catch up in AI and its companies are likely to use home-grown cloud computing hardware and software. Alpha Technology Group could fill that gap over the coming years if big-name Chinese companies dump even more money into AI development.
