Three Underrated AI Stocks Worth Watching

The artificial intelligence (AI) sector is rapidly changing industries and presenting numerous economic opportunities. Research shows that global AI spending could lead to a $19.9 trillion economic impact by the year 2030. As this AI boom continues to gain momentum, many smart investors are beginning to look for lesser-known companies that are well-positioned to benefit from this technological transformation.

Let’s take a closer look at three companies that are quietly making strides in the AI landscape, highlighting unique strategies to leverage this evolving technology.

Driving Energy Efficiency in AI

Navitas Semiconductor (NVTS -2.73%) is leading the charge with innovative power solutions that are essential for the energy-efficient operation of AI data centers. The company specializes in GaN (gallium nitride) and SiC (silicon carbide) power semiconductors, which can offer better efficiency compared to traditional silicon chips.

The recent launch of their "IntelliWeave" digital control technology is particularly noteworthy, as it allows AI data center power supplies to exceed 99% efficiency. This advancement could significantly reduce energy consumption while meeting the high computational demands of AI applications.

Although Navitas is not yet profitable, it is experiencing robust revenue growth. In the second quarter of 2024, the company reported a revenue of $20.5 million, marking a 13% increase from the previous year. With over 60 projects in its pipeline for data center customers and new AI-focused products recently introduced, Navitas appears well-equipped to capitalize on the growing investments in AI infrastructure.

Creating AI Infrastructure

Applied Digital (APLD -3.67%) is expanding its high-performance computing resources to meet the surging demand for AI processing capabilities. The company is focused on designing, building, and managing next-generation data centers specifically optimized for AI and machine learning functionalities.

Applied Digital's cloud services division is also experiencing significant growth, having added two new graphics processing unit (GPU) clusters in the latest quarter. This segment generated $25.9 million in revenue. Progress is being made on their first 100 MW high-performance computing facility in North Dakota, with plans to increase the total site capacity to 400 MW. The company is already in the design phase for two additional buildings at this location to further enhance their capacity for AI computing resources.

A notable $160 million private placement involving investments from Nvidia and major real estate developer Related Companies highlights Applied Digital's potential in the AI infrastructure sector. Even though the company reported a net loss for fiscal Q1 2025, ending August 31, its revenue surged by 67% year over year, reaching $60.7 million driven by growth in its cloud services division.

From Crypto to AI

Iris Energy (IREN 6.03%) is transitioning from its foundations in Bitcoin mining to explore opportunities in AI computing. Leveraging its existing data center infrastructure and renewable energy capabilities, the company is making strides in the AI cloud services market, reporting $3.1 million in revenue for fiscal year 2024 through various customer contracts.

Iris Energy's transformation into AI is still in its early stages, but the company is evaluating potential AI data center projects for its substantial 1.4 GW site in West Texas, exploring possibilities with potential partners.

Despite facing challenges in the fluctuating Bitcoin mining sector, Iris Energy showcased improved financial results for fiscal year 2024, ending June 30, with earnings before interest, taxes, depreciation, and amortization (EBITDA) reaching $19.6 million, a significant turnaround from a loss of $123.2 million the previous year. Their Bitcoin mining revenue hit an all-time high of $184.1 million, up from $75.5 million in the earlier year.

A Cautious Outlook

While these companies offer compelling opportunities to engage with the AI revolution, they come with important risks. All three are currently unprofitable and navigate fierce competition within their respective sectors. Their long-term success relies on the sustained growth and adoption of AI technologies.

For investors willing to accept a higher level of risk to potentially discover future AI leaders, Navitas Semiconductor, Applied Digital, and Iris Energy present unique perspectives on the ongoing AI evolution that many investors may not yet be aware of. As the AI domain continues to progress, these under-the-radar players could emerge as significant beneficiaries of this transformative wave.

AI, Investing, Stocks