Global markets are wrestling with stubborn inflation, higher bond yields and rising energy costs, which puts pressure on traditional playbooks and leaves many investors looking for the next engine of growth. One area drawing attention is smaller companies building real-world AI tools for machine learning, automation and data intelligence. These stocks sit away from the headlines around the mega caps and can sometimes be earlier in their growth journey, which is exactly what the AI Small Caps screener is built to find. In this article, you will see three stocks from that screener worth a closer look.

GitLab (GTLB)

Overview: GitLab provides an all in one DevSecOps platform that helps companies plan, build, secure and deploy software in a single place, and is expanding into AI agents that can automate many of those tasks for development teams. Its GitLab Duo Agent Platform layers conversational AI, workflow automation and governance controls on top of the core product to help enterprises manage software delivery at scale.

Operations: GitLab generates about US$955.2 million in revenue, almost entirely from subscriptions sold across self managed and SaaS models, with around US$787.3 million from the United States and the balance mainly from Europe.

Market Cap: US$4.0b

GitLab sits at the intersection of AI and software development, with a single platform that combines DevSecOps workflows, embedded security and a growing suite of AI agents, all backed by partnerships with Amazon, Google, Anthropic and OpenAI. The company is still loss making and analysts do not expect profitability in the next three years. Competition from GitHub and newer AI tools is intense, and recent restructuring, including workforce reductions and country exits, introduces execution risk. Some analysts view the stock as trading below their estimates of fair value, and they see revenue growing faster than the wider US software market. A US$400 million buyback also signals management confidence. For investors who can handle volatility, this mix of AI exposure, recurring revenue and restructuring could make GitLab a candidate for further research.

GitLab’s AI agents, recurring subscriptions and US$400 million buyback could be re-rating fuel. However, the real tension sits between growth ambitions and execution risk, which is unpacked in the 2 key rewards and 3 important warning signs (1 is major!)

Pagaya Technologies (PGY)

Overview: Pagaya Technologies runs an AI powered credit decisioning and funding platform that helps banks, fintechs and other lenders approve more borrowers while managing risk, then packages those loans into asset backed securities for institutional investors. Its tools plug directly into partner workflows to evaluate applications in real time, route them to funding channels and support customer acquisition across consumer credit, auto finance and real estate.

Operations: Pagaya generates about US$1.3b in revenue from software and programming services tied to its AI underwriting and securitization platform.

Market Cap: US$1.1b

Pagaya sits at the intersection of AI, lending and securitization, with an underwriting engine that partners say improves approval rates and supports a growing stream of consumer and auto loan ABS deals. The company has recently reported several quarters of GAAP profitability with raised guidance for 2026. It still trades at a low P/E multiple and at a steep discount to one estimate of fair value, which may appeal to investors who care about both growth and value. High beta, reliance on wholesale funding and a history of one off items mean the ride can be bumpy, so the key question is whether earnings momentum and partner expansion can stay ahead of those risks.

Pagaya’s mix of GAAP profits, raised 2026 guidance and a low P/E suggests the story is shifting faster than many screens show, but the real twist sits inside the 4 key rewards and 1 important warning sign

Penguin Solutions (PENG)

Overview: Penguin Solutions designs and manages high performance computing, AI infrastructure and memory systems for enterprises, governments and telecoms. The company combines servers, GPUs, storage and software under brands like Penguin Solutions, Stratus and SMART Modular Technologies.

Operations: Penguin Solutions generates about US$1.3b in revenue, with roughly US$570.4 million from Integrated Memory, US$538.0 million from Advanced Computing and US$239.8 million from its Optimized LED segment.

Market Cap: US$2.4b

Penguin Solutions is one to watch for investors interested in the “picks and shovels” behind AI. Its OriginAI and MemoryAI products are aimed at helping enterprises run GPU heavy workloads more efficiently, and alliances with Deepgram, Dell Technologies, SK Telecom and SK hynix help support its pipeline. Recent guidance calls for higher 2026 sales and EPS, and the company has turned profitable, with earnings expected by analysts to grow quickly. However, the stock trades on a rich P/E, and recent insider selling may encourage some investors to be cautious. Heavy exposure to large, lumpy infrastructure deals and tariffs on its China based LED manufacturing also keeps risk firmly on the table, which is where the real debate begins for investors.

Penguin Solutions’ rich P/E, AI infrastructure exposure and recent profitability suggest a situation where enthusiasm and risk might not align. Before opinions harden, review the 2 key rewards and 1 important warning sign

The three AI stocks covered here are just a starting point, with the full AI Small Caps screener surfacing 30 more smaller AI companies that each carry their own compelling narrative around machine learning, automation and data intelligence. Use Simply Wall St to identify and analyze the specific catalysts, risks and business stories that matter most to you so you can focus on the AI small cap opportunities that align best with your own views.

Take Control of Your Investment Journey

If Penguin Solutions or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

Curious About What Else Could Be Working?

Stocks move fast, stories shift and fresh ideas can start their breakout phase while attention is elsewhere. Scan these under the radar for now opportunities before the crowd and consider them while they are still less widely followed.

• Spot income opportunities that aim to keep paying even when growth stocks wobble by checking out a curated set of 14 dividend fortresses built for staying power.
• Track companies quietly building the backbone of global energy as grids modernize and electrification gathers momentum with a focused group of 34 power grid technology and infrastructure stocks.
• Zero in on miners that could benefit if gold sentiment turns, using a tight collection of 33 elite gold producer stocks selected for production strength and balance sheet quality.

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.