Penny stocks have been getting less attention than usual due to the recent market correction. That’s especially true for those involved in AI. Many AI startups have plunged as investors now look at AI as a source of risk instead of something to pay a premium for.
That said, if you are bullish on the long-term prospects of AI, it’s worth keeping an eye on some high-potential AI penny stocks. If the AI narrative succeeds, these stocks could deliver multibagger gains.
Having a small portion of your portfolio in such high-risk, high-reward bets is not a bad idea. These companies can land massive contracts in the future and become multibaggers if the stars align.
indie Semiconductor (NASDAQ:INDI) is a semiconductor company, as the name suggests, It is mostly in the automotive industry. It makes automotive semiconductors and software for advanced driver assistance.
Recent fears surrounding Tesla (NASDAQ:TSLA) have made the sector extremely bearish. Investors are fearful of anything relating to electric vehicles. As a result, the stock is down over 45% year-to-date, but I think it can bounce back.
Tesla’s weakness is unlikely to weigh on the company significantly since indie Semiconductor’s revenue comes from multiple automotive customers. Tesla has increasingly shifted to its in-house software and chip solutions, whereas indie Semiconductor’s biggest customers are Ford Motor (NYSEF) and General Motors (NYSE:GM).
I believe indie could gain from Tesla’s sales volume falling off a cliff. Elon Musk getting into politics has alienated his core customer base. These people are unlikely to buy Teslas and could push up demand for companies that are major customers of indie.
The company projects $55 million in Q1 2025 revenue. Analysts expect breakeven in 2026 and a massive increase in profits in 2027. You’re currently paying just 4.5 times 2027 earnings estimates (midpoint). Revenue is also expected to more than double from $263.6 million this year to $580.3 million in 2027.
The consensus price target of $7.5 implies 224% upside potential.
DroneShield (OTCMKTS:DRSHF) is a drone defense company. it makes counter-drone systems, and while it’s not an AI pure-play, its counter-drone tech does integrate machine learning.
The company is based in Australia. DRSHF stock surged from late 2023 to mid-2024, but it declined about 75% from its peak to its trough this year as excitement cooled. However, the stock has started rallying again due to European countries increasing their defense budgets and diversifying sources of their weaponry. DroneShield could be a key long-term beneficiary, and it has already landed multi-million contracts for both the U.S. government and European clients.
As drone usage increases, sales are expected to almost double from $63 million to $112 million from 2025-2027.
Unisys Corporation (NYSE:UIS) is an IT and consulting company. It has cloud services, cloud AI solutions, and enterprise computing solutions.
Given what this company does, you’d expect it to be a major beneficiary of the AI rally over the past two years. However, the stock has traded sideways with several ups and downs since 2023 as it bottomed out from its 2022 selloffs.
That’s understandable due to the company’s top-line growth being disappointing. In Q4, revenue declined 2.19% to $545.4 million. But I still think that the stock is undervalued. You are paying just over 8 times forward earnings for the stock, and earnings are expected to rise 79% in 2026 after an 8.9% rise this year. Revenue is also expected to start recovering in 2026.
If the AI narrative succeeds, UIS could climb significantly as it has several segments with exposure to AI that could land big contracts. It is targeting a $100 million pre-pension cash flow this year, with a License and Support growth margin of 70%.
