Mega-cap tech stocks aren't worth the price compared to their small-cap alternatives
Mega-cap tech stocks may grab all the headlines NVIDIA (Nasdaq:NVDA) and Microsoft (Nasdaq:MSFT) are in a fierce race to become the top market cap stock, but that doesn't mean there aren't plenty of missed opportunities among smaller, lesser-known tech stocks.
Finding tech stocks is not easy in today's market. A combination of factors, including excessive concentration, rising debt costs, and growing awareness of the inherent limitations of AI, make it difficult to pick the right tech stocks. Reduced liquidity, increased volatility, and increased sensitivity to bad news and market movements also make trading lesser known tech stocks riskier than buying blue chip stocks.
Of course, that's what makes buying these tech stocks even more profitable. Here are a few to consider:
Photoronics (PLAB)
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Photoronics (Nasdaq:PrabhuPhotronics plays a key role in today's cutting edge technology sector and has great potential for growth in the future. Unlike other semiconductor stocks, Photronics specializes in developing semiconductor photomasks, a technology that is complex but will have a huge impact in the future.
First, Photronics' photomasks are essential to ensure the precision and accuracy needed to manufacture microchips. These photomasks power advancements in artificial intelligence and quantum computing by enabling increasingly complex circuits to be created with greater precision. Additionally, they play a key role in shrinking transistors and components, essentially driving Moore's Law. This combination of precision and cost-efficiency puts Photronics at the nexus of current and emerging technologies, making Photronics a strong contender among lesser known tech stocks.
Photronics' stock trades at just 12 times earnings, making it an attractive tech stock. The company's revenues have been steady, if unspectacular, suggesting a strong financial position. Although Photronics is a relatively new player in the semiconductor industry, it is well positioned to benefit from the growing reliance on semiconductors across a range of industries.
YEXT
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Perhaps you have encountered Yexist (New York Stock Exchange:YEXT) and its various marketing products, probably without even realizing it. With broad market penetration, Yext's platform is used by large companies such as: Samsung and Verizon (New York Stock Exchange:VZBut its potential to become a standout among tech stocks has gone largely unnoticed.
Yext offers a comprehensive suite of digital marketing tools, including SEO, content management, reputation and review management, social media, and in-depth analytics to drive strategic decision-making. As internet marketing becomes increasingly complex, developing in-house expertise to address all these demands can be cost-prohibitive. Yext's platform aggregates these essential services and provides a critical solution for navigating the digital marketing landscape. Additionally, Yext's platform has an inherent “stickiness” that fosters client loyalty, because once integrated into the Yext ecosystem, the cost of switching to another system is high.
The company's latest earnings report was strong, highlighting significant AI integration. AI is currently widespread but underutilized in digital marketing. Yext is effectively filling this gap. Yext's most recent earnings per share were $0.05, compared to a loss of $0.03 a year ago. Despite this bright outlook and better-than-expected revenue, the stock has fallen this year, making it a great entry point for investors. Yext offers a promising opportunity to invest in the future of AI-driven digital marketing and get a stake in a lesser known tech stock.
STEM
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stem (New York Stock Exchange:stem) stands out in the sustainable energy space by blending renewable energy solutions with artificial intelligence. The core of Stem's product is Athena, an advanced control system that integrates and optimizes resources from generators, grid power, solar plants, and battery storage. Athena uses AI to make real-time decisions based on factors such as weather and energy prices, providing large enterprise clients with self-managed, efficient energy solutions.
Though it's currently a penny stock, Stem has ambitious growth plans, with management aiming to increase its value by 10x. The company's strategic vision is outlined in a white paper called “AI and the Future of Energy,” which details how the integration of AI will drive efficiency and growth in the sustainable energy market.
Like many speculative tech stocks, Stem faces challenges including a lack of profitability and cyclical sales that make it volatile. However, the company has progressed past the pre-revenue stage and has a growing portfolio of completed projects. Stem represents a promising long-term investment opportunity in the sustainable energy sector, especially for those looking to leverage the emerging influence of AI within green infrastructure. Adding Stem to your portfolio could be a strategic move to benefit from the continued integration of AI into renewable energy.
As of the publication date of this article, Jeremy Flint did not hold any positions in the securities mentioned. Opinions expressed in this article are those of the author and follow InvestorPlace.com's Publication Guidelines.
