Even as many emerging technology companies are increasing their investments in the artificial intelligence (AI) space, Nvidia's NVDA remains unmatched. Nvidia's high-performance GPUs power nearly every industry.
Still, as the AI era advances, many undervalued small companies have the potential to thrive. These companies have strong AI capabilities and show great growth potential. If you missed out on Nvidia, investing in these stocks gives you the opportunity to benefit from the AI boom.
#1. UI Pass
UiPath PATH is an enterprise and AI automation software company valued at $7.1 billion. The company is best known for its Robotic Process Automation (RPA) software platform that automates repetitive tasks across multiple industries. Recently, Gartner announced that UiPath retained the top spot in the 2024 RPA Magic Quadrant for the sixth consecutive year.
Despite a strong start to fiscal 2025, the company's shares are down 49% so far this year, while the broader S&P 500 index SPX is up 18%.
UiPath's platform includes automation, AI, and machine learning (ML) tools known for its simplicity, scalability, and ability to integrate with a wide range of systems. Increasing demand for automation solutions across industries is fueling UiPath's growth.
The company's revenue model is primarily subscription-based, creating a predictable and stable revenue stream: Annualized recurring revenue (ARR) is expected to grow 21% year over year to $1.5 billion in the first quarter of fiscal year 2025.
Total revenue was $335 million, up 16% year over year and beating consensus estimates by $2.1 million. After reporting a GAAP earnings per share of $0.06 in the fourth quarter, UiPath reported a net loss of $0.05 in the first quarter, which is likely the reason for the stock price decline.
The company has integrated generative AI into its platform and has released the AI-powered UiPath Autopilot for developers and testers. The company has partnered with Alphabet GOOGL and Microsoft MSFT to enable customers to leverage UiPath's AI-powered business automation platform on Google Cloud and Microsoft Azure.
At the end of the first quarter, PATH had cash, cash equivalents and marketable securities of $1.9 billion and an adjusted free cash flow balance of $101 million.
Management expects ARR to be in the range of $1.66 billion to $1.665 billion in fiscal 2025. Analysts expect UiPath's revenue and earnings to grow 7.6% in fiscal 2025 and 11.8% in fiscal 2026. The consensus expects earnings per share of $0.38 in fiscal 2025 and earnings to grow 16% in fiscal 2026.
As organizations increasingly leverage automation to drive efficiency, reduce costs, and improve accuracy across a range of business processes, the global RPA market is set to expand significantly, projected to grow at a compound annual rate of 39.9% by 2030.
UiPath dominates the market and is expected to dominate for years to come, but like many fast-growing technology companies, whether UiPath can balance growth and profitability in the face of increasing competition will prove its viability as a long-term investment.
PATH trades at roughly five times its projected 2025 sales, making it a good AI robot stock to invest in right now.
On Wall Street, UiPath shares are rated as a “hold.” Of the 19 analysts covering the stock, two rate it a “strong buy,” one a “moderate buy,” and 16 rate it a “hold.” Based on the average target price of $16.12, the stock could rise 27.1% from current levels. Moreover, Wall Street's highest price forecast of $30 suggests the stock could rise up to 136.7% over the next 12 months. Barchart
#2. Arista Networks
Valuated at $111.3 billion, Arista Networks ANET is a leading provider of cloud networking solutions for large-scale AI data centers, campuses, and routed environments. The company's portfolio includes a range of hardware and software products, including switches, routers, and network management software, all designed to meet the high-speed, rapid demands of cloud computing environments.
Arista shares are up 46.3% year to date, outperforming the broader market.
Second-quarter total revenue increased 15.9% year over year to $1.69 billion, and adjusted net income rose 32.9% year over year to $2.10, both beating market expectations.
In June, the company unveiled the Arista Etherlink AI Platform, which delivers optimal network performance for the most demanding AI workloads, including training and inference, and more recently announced a partnership with Nvidia to orchestrate AI networking and AI computing infrastructure.
Arista's strong balance sheet, featuring significant cash reserves, gives the company the financial flexibility to pursue growth opportunities in AI. It ended the quarter with $6.2 billion in cash, cash equivalents and marketable securities.
The company did not provide full-year guidance, but it expects third-quarter sales to grow 14% to 16% year over year. Analysts covering the stock expect Arista's full-year 2024 sales and earnings to grow 16.2% and 18.7%, respectively. Additionally, in 2025, sales and earnings are expected to grow 17.2% and 13.7%, respectively.
ANET is expensive, trading at 37 times projected earnings for 2025. However, the company's revenue is closely tied to the growth of cloud computing and data center expansion, making it well-positioned to take advantage of these long-term trends.
On Wall Street, Arista shares are rated as a “moderate buy.” Of the 23 analysts covering the stock, 15 rate it a “strong buy,” two rate it a “moderate buy,” five rate it a “hold,” and one rate it a “strong sell.” ANET is trading near its average target price of $356.65, but Wall Street's highest price estimate of $432 suggests the stock could rise 24.5% over the next 12 months. Barchart
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information please see Barchart's disclosure policy here.
