What’s the best small or mid-cap stock in the AI space right now for investors?
Seeking Alpha analysts Bay Area Ideas, Yiannis Zourmpanos, Michael Del Monte, and Julian Lin weigh in.
Bay Area Ideas: Among SMID AI stocks, Applied Digital (NASDAQ:APLD) is a standout. Their largest growth driver is HPC hosting, and with hyperscaler demand for compute being unrelenting, they’ve been a major beneficiary. In FY2026 Q1, revenue growth rocketed from 41% in the previous quarter to 84%, so demand is accelerating. For their bottom line, they’ve been able to narrow their per-share losses year-over-year from $0.15 to just $0.03. They’re on the verge of turning profitable.
Looking forward, Polaris Forge 1 is set to open before the end of the calendar year, while two other facilities are in the works for launches in 2026 and 2027. With compute demand being robust among hyperscalers, this increased capacity will fuel Applied Digital’s (NASDAQ:APLD) growth.
While the stock is trading at an elevated forward P/S ratio of 31.38, with the company targeting an NOI run rate of $1 billion within 5 years, the valuation isn’t as expensive as it seems. The company currently has a market cap of ~$8 billion, so if they hit their targets, the stock may actually be cheap. Given the opportunity ahead and the not-so-outrageous valuation, Applied Digital (NASDAQ:APLD) stock is well positioned to outperform.
Yiannis Zourmpanos: Here are my top picks right now.
Eos Energy Enterprises (NASDAQ:EOSE) sits at the crossroads of the AI power boom and America’s energy independence movement. While lithium-ion incumbents face fire risk and China exposure, Eos is scaling a domestic, non-flammable zinc-bromine platform backed by over $90 million per year in 45X production credits per line and a $19 billion project pipeline feeding hyperscaler and grid-scale demand.
CleanSpark (NASDAQ:CLSK) stands at the intersection of Bitcoin and AI-driven energy infrastructure. While IREN (NASDAQ:IREN) had a strong bull run and chased GPU headlines, CleanSpark quietly commands 1+ GW of U.S. power, 50 EH/s of hash rate, and 55% margins, all self-funded and primed to evolve into America’s first true digital compute utility.
Michael Del Monte: Regal Rexnord (NYSE:RRX) is an appealing name in the SMID space, operating across markets that can drive secular growth, including reindustrialization, industrial automation, and data center buildouts. The company manufactures various parts and components, as well as complete systems utilized across these markets, including electric motors, bearings, switchgear, and automation systems for manufacturing processes. The stock is trading at a relatively low premium of 10.66x EV/aEBITDA, a modest discount to its historical midpoint of roughly 12.25x. The company has been deleveraging its balance sheet in recent quarters, freeing up capital for organic growth.
Julian Lin: I urge caution on chasing AI names, not just due to valuation, but also given the potential disruption of which the full ramifications have not been revealed.
I prefer to instead focus on the large-cap plays, including Amazon (AMZN) and Alphabet (NASDAQ:GOOGL). These might not offer the same explosive upside, but that is compensated by their high cash flow generation as well as their “picks and shovels” positioning in cloud computing. I see solid upside for both names ahead.