Retail investors flock to small-cap AI firms as Big Tech battles for share

Guardforce AI

07/02/2023 13:53

By Medha Singh
       Feb 7 (Reuters) - Retail investors are piling into
small-cap firms that employ artificial intelligence amid
intensifying competition between tech titans Google parent
Alphabet and Microsoft to secure leadership in the next big
driver of growth.
    The viral success of ChatGPT has turned the spotlight on AI
on Wall Street, reminiscent of the blockchain hype from a few
years ago when shares of companies remotely associated with the
technology surged.    
    The $3-billion AI software firm C3.ai was the fifth most
actively traded on Fidelity's platform for small investors on
Monday, while drawing record daily retail inflows worth $31.4
million, as per Vanda Research.
    "Small-cap firms have AI as a much larger part of their
business than the larger ones," said Matthew Tuttle, chief
executive officer of Tuttle Capital Management on the reason
behind retail investors' focus on the smaller firms.
    Tuttle said he had shorted C3.ai shares about a week ago,
but was looking to switch to the long side because "that's where
the action is."
    SoundHound AI  SOUN.O , which offers a voice AI platform
services, and Thailand's security firm Guardforce AI  GFAI.O 
have more than doubled so far this year, while analytics firm
BigBear.ai  BBAI.O  gained nine-fold in value.
    "We are in a new and exciting AI arms race right now, and
speculative investors are clearly trying to find the potential
winners in the increasing growing caldron of AI adjacent
companies," said Arthur Hogan, chief market strategist at
B.Riley Wealth.
    Shares of Microsoft  MSFT.O , which backs ChatGPT parent
OpenAI, gained 1.5% in premarket trading ahead of the AI launch
later in the day.
    Google-owner Alphabet Inc  GOOGL.O  on Monday said it would
launch a chatbot service Bard and more artificial intelligence
for its search engine as well as developers.
    Microsoft is in a strong position in the AI race due to the
combination of its close partnership with OpenAI and its Azure
capabilities around compute and data, said Barclays analyst
Raimo Lenschow.
    U.S.-listed shares of Baidu Inc  BIDU.O  climbed nearly 15%
on Tuesday after the Chinese search engine said it would
complete internal testing of a ChatGPT-style project called
"Ernie Bot" in March. Earlier in the day, a clutch of Chinese AI
stocks had also rallied. 
    "There will clearly be winners and losers in the markets
current new thing AI, but it will also take some time to
ascertain how all these artificial intelligence focused
companies plan on monetizing this exciting new technology,"
Hogan said.
 (Reporting by Medha Singh in Bengaluru; Editing by Sriraj
Kalluvila)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))