AI is not just a story about mega caps any more, and smaller companies at the cutting edge of machine learning, automation, and data intelligence are starting to attract serious interest. With inflation trends, energy costs, and interest rate expectations pulling markets in different directions, many investors are looking for focused ways to target potential long term growth rather than broad market exposure. The AI Small Caps screener is built for that; it highlights earlier stage stocks linked to this theme. In this article, you will see 3 stocks from the screener that aim to capture this opportunity.

Pagaya Technologies (PGY)

Overview: Pagaya Technologies builds AI powered tools that help banks, fintechs, auto lenders and real estate players decide which borrowers to approve and then fund those loans through institutional investors and asset backed securities. Its platform plugs directly into partners’ loan application flows so they can approve more customers, manage risk with data driven underwriting and access capital markets more efficiently.

Operations: Pagaya currently generates about US$1.33b in revenue from its Software & Programming activities.

Market Cap: US$1.12b

Pagaya sits at the intersection of AI and credit, with its underwriting and ABS platform now profitable and supporting guidance for US$1.4b to US$1.575b in 2026 revenue alongside five consecutive quarters of GAAP net income. Partnerships with lenders like Sezzle and Experian, plus large AAA rated ABS deals in personal and auto loans, indicate that its technology and funding model are gaining traction. At the same time, the stock’s P/E of 11.6x is well below the US software industry average, and the balance sheet leans heavily on wholesale funding, so execution, credit conditions and competition in AI lending all remain important factors. Investors who want the full story will need to look closely at how those positives compare with the risks.

Profitable AI underwriting with a P/E of 11.6x suggests Pagaya’s story may not be fully priced in yet. However, the balance of credit risk and upside is tricky to judge from the outside, so tap into the 4 key rewards and 1 important warning sign

Ambarella (AMBA)

Overview: Ambarella designs low power chips and software that let cameras and other connected devices run artificial intelligence directly on the device, handling tasks like video analytics, image processing, and advanced driver assistance. Its technology sits inside automotive cameras, security systems, robotics, and other edge AI hardware used by equipment makers around the world.

Operations: Ambarella currently generates about US$390.7m in revenue, all from its semiconductor business, with a large share linked to customers in Taiwan and the wider Asia Pacific region.

Market Cap: US$3.42b

Ambarella sits in the space between semiconductors and edge AI, with a unified CVflow platform, edge AI revenue and a product pipeline that targets automotive safety, smart security, robotics, and other use cases. Revenue of US$390.7m and expectations for double digit annual growth indicate why some analysts see scope for multi year expansion. However, the company reports losses and relies heavily on IoT markets and concentrated customers, so earnings quality and cash flows may be as important as top line potential. For investors, a key consideration is whether potential design wins and higher margin 5 nm chips can balance funding risk, insider selling and current unprofitability over time.

Ambarella’s edge AI story is accelerating; however, current losses and reliance on key IoT customers leave an open question. Get the full context in the analyst forecasts for Ambarella before the next chapter becomes obvious.

Penguin Solutions (PENG)

Overview: Penguin Solutions designs and runs high performance computing and AI infrastructure for enterprises, governments, and OEMs, combining hardware, software, and services across brands like Penguin Solutions, Stratus, Penguin Edge, SMART Modular Technologies, and Cree LED.

Operations: Penguin Solutions generates about US$570.4m of revenue from Integrated Memory, US$538.0m from Advanced Computing, and US$239.8m from Optimized LED solutions.

Market Cap: US$2.24b

Penguin Solutions gives investors direct exposure to the build out of AI and high performance computing, with OriginAI and MemoryAI products aimed at easing GPU and memory bottlenecks as enterprises, neocloud providers, and sovereign AI projects look for turnkey infrastructure. The company has recently moved into consistent profitability with improving EPS guidance, while alliances with Deepgram, Dell, SK Telecom, and SK hynix point to potential for deeper product adoption across voice AI and large context inference. However, revenue can vary with the timing and size of large Advanced Computing deals, Optimized LED is exposed to China related tariffs, and new memory platforms require substantial R&D investment before potential benefits are realized. The key consideration is how that mix of growth opportunities and lumpier risks compares for long term investors.

Penguin Solutions’ AI infrastructure story is building across OriginAI, MemoryAI and big ticket computing deals, yet the real twist may sit in the analysis report for Penguin Solutions

The three stocks covered here are just a starting point, and the full AI Small Caps screener surfaces 28 more AI focused small caps with equally compelling narratives that you have not seen yet. Use Simply Wall St to identify and analyze the specific catalysts and storylines that matter to you so you can focus on the highest conviction opportunities instead of scrolling through endless tickers.

Take Control of Your Investment Journey

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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.