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

Guardforce AI

07/02/2023 15:13

(Updates prices at market open, adds strategist comment)
    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  AI.N  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. The stock slipped 4.5% on
Tuesday, but is up about 140% so far this year.
    "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."
    Shares of 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.
    SoundHound AI was last up 4% and Guardforce AI  GFAI.O 
added 12%, while BigBear.ai  BBAI.O  slipped 10%.
    Shares of Microsoft  MSFT.O , which backs ChatGPT parent
OpenAI, gained about 2% ahead of a potential 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. 
    "The market is right now trying to search for what would the
next big thing that's going to lead markets over the next 10
years and AI is that," said Chen Zhao, chief global strategist
at Alpine Macro.
    "It could be speculative in nature, but everybody thinks
that it's going to be a big deal going forward."
 (Reporting by Medha Singh in Bengaluru; additional reporting by
Bansari Mayur Kamdar, Editing by Sriraj Kalluvila)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))