Global bond yields have climbed as investors demand higher compensation for inflation risk, which puts pressure on traditional growth stocks that rely heavily on cheap capital. This shift is directing more attention toward AI Small Caps, where earlier stage advances in machine learning, automation, and data intelligence do not always require large balance sheets. This article highlights three AI Small Caps from our screener that could benefit from this backdrop.

The three AI Small Caps in this article are just a starting sample, and the full screen surfaced 29 more companies with equally compelling narratives that are not covered here. If you want to get straight to work, use the AI Small Caps screener to identify, analyze, and prioritize your highest conviction AI ideas.

Butterfly Network (BFLY)

Butterfly Network is a medical imaging company that puts ultrasound on a chip and pairs handheld iQ devices with AI-enabled software to bring whole body scanning to smartphones, tablets, and hospital systems. Its core revenue of about US$112 million comes from providing an AI enhanced personal ultrasound solution, rather than splitting out individual products like Compass AI or ScanLab. The company has a market cap of about US$2.4 billion, which places Butterfly Network firmly in the AI Small Caps space.

Investors looking beyond the mega cap AI giants may want to watch Butterfly Network because its Compass AI and ScanLab platforms sit on top of semiconductor based handheld probes, so each new device can feed more imaging data into AI driven workflows and education tools. Recent earnings updates describe record quarterly revenue, high gross margins, and expanding embedded and Compass AI partnerships, which speak directly to the software and data angle. The flip side is that Butterfly Network is still loss making, carries a high P/S multiple, and has seen meaningful insider selling in 2026, which raises questions about execution and future dilution risk. The real question is whether Compass AI and related software can grow into a higher margin, recurring revenue engine before investor patience wears thin.

Butterfly Network’s AI ultrasound story hinges on whether its software can outpace losses and justify a rich P/S. Get the full picture with the 1 key reward and 3 important warning signs (1 is major!)

Build your own AI ultrasound and data edge shortlist

Butterfly Network and the two other AI Small Caps in this article all surfaced from a single Simply Wall St screener, which you can easily tailor to your own process. Use our flexible Screener to mix valuation, growth, balance sheet and risk filters, or start with any of our curated Investing Ideas for ready made shortlists.

Penguin Solutions (PENG)

Penguin Solutions is a US based enterprise hardware and services company that helps customers run high performance computing and AI workloads across data centers and the cloud. It earns about US$715 million from Integrated Memory products, US$543 million from Advanced Computing, and US$244 million from Optimized LED, so AI focused offerings like OriginAI GPU infrastructure, Altus servers, and Zefr memory are important but sit within a broader, diversified portfolio. The company has a market cap of roughly US$3.2b, putting Penguin Solutions firmly in AI small cap territory.

Penguin Solutions may appeal to investors looking for exposure to the less crowded side of AI. OriginAI, AMD EPYC based Altus servers, Zefr memory modules, and the new ClusterWareAI Factory OS place the company directly in the build out of GPU clusters and data center infrastructure that train and run large models. At the same time, revenue still leans on lumpy, project based Advanced Computing deals, tariff exposed LED manufacturing in China, and R&D projects that may take years to pay off, which can affect margins and cash flow. A key question is how this mix of AI partnerships, software and services, and a profitable but capital intensive hardware base develops from here.

Penguin Solutions is wiring the AI data center build out with GPU clusters, memory and software, yet the full risk reward trade off is not obvious from headlines alone. Pressure test that story with the 4 key rewards and 2 important warning signs (2 are major!)

Klaviyo (KVYO)

Klaviyo runs a cloud based B2C CRM platform that blends marketing, customer service and analytics, with its AI Marketing Agent and Customer Agent using machine learning to automate campaigns and personalize support across email, SMS, social and other channels. The company generated about US$1.39b from internet software in its latest period and serves brands globally, with the United States its largest market alongside contributions from Europe and Asia-Pacific. Klaviyo has a market cap of about US$5b, which keeps it firmly in AI Small Caps territory.

Investors looking for AI beyond the mega caps may be interested in Klaviyo because its agents use real time first party data to run marketing and service tasks that brands usually pay people to handle. Recent Q2 2026 results point to 26% revenue growth supported by AI product uptake and larger enterprise contracts. At the same time, higher SMS and infrastructure costs, mixed analyst views after the Agency acquisition, and dependence on partners like Shopify mean the path to sustained margin expansion is not guaranteed. If you want to understand whether Klaviyo’s AI agents and growing international footprint can justify its valuation and funding needs, the full story goes much deeper than headline growth rates and a single earnings print.

Klaviyo’s accelerating AI agent uptake and 26% revenue growth story often looks simple on the surface, yet the real question is how sustainable that momentum is. Pressure test that growth path with the analyst forecasts for Klaviyo

Seeking Alternatives Before Momentum Flies

Fresh stock ideas can move from quiet to flying fast. Use this moment before the crowd catches on and the best entries drop out of reach, and act now.

• Spot companies with strong cash flows and robust balance sheets before they move by scanning our curated 50 high quality undervalued stocks and build a list worth a closer look.
• Track capital return potential from reliable payers by checking our curated 11 dividend fortresses while yields still reflect current prices and before momentum pulls them away.
• Get ahead of the next infrastructure build out by scanning our hand picked 39 power grid technology and infrastructure stocks while these opportunities remain under the radar for now.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.