Best AI Stocks Under $20
You see it everywhere—from the AI that powers your Netflix queue to the buzz around ChatGPT. Artificial intelligence is clearly shaping the future, but when you hear about AI stocks, names like NVIDIA come up with price tags in the hundreds or thousands of dollars. It can easily feel like you’re priced out of the entire AI revolution.
What if you could invest in AI for less than the cost of a nice dinner? While plenty of affordable AI stocks exist under $20, it’s crucial to understand a key investing secret: a low stock price doesn’t automatically mean it’s a bargain. This guide will help you understand the story behind these accessible companies and provide a framework for finding promising players.
Why a $10 Stock Isn’t “Cheaper” Than a $500 Stock
The single most common trap for new investors is thinking a $10 stock is a better bargain than a $500 stock. Many people wonder, “are cheap AI stocks a good investment?” and the answer depends entirely on why they are cheap. The share price alone tells you almost nothing about a company’s real value.
The pizza analogy is the best way to understand this. Imagine a tiny, personal pizza cut into four slices, with each slice costing $10. The whole pizza is worth $40. Now, imagine a giant party pizza cut into 1,000 slices, with each slice costing $5. That whole pizza is worth $5,000! The $5 slice gives you ownership in a much more valuable pizza. In investing, the value of the whole pizza is called market capitalization—it’s the total price tag for the entire company.
A huge, stable company can have a low stock price; it might have simply cut its ownership “pizza” into millions of tiny slices. On the other hand, a sub-$5 stock price can often be a warning sign that a company is very small, unproven, or in financial trouble. A lower price doesn’t mean it’s a hidden gem; it can often signal higher risk.
Our goal is not to find the stocks with the lowest price tag. It is to understand what makes an AI stock potentially undervalued by looking at the entire business, not just the price of a single share.
The Two Main Types of AI Stocks You Need to Know
A helpful way to categorize AI companies comes from a lesson learned during the 1849 Gold Rush. The people who consistently made fortunes weren’t just the lucky few who struck gold, but the merchants who sold picks, shovels, and work pants to all the miners. They profited from the overall trend, regardless of which individual miner succeeded. This “picks and shovels” idea gives us a simple framework for sorting through AI stocks.
In one corner, we have the Builders. These are the modern-day pick-and-shovel sellers. They create the fundamental technology that the entire AI industry relies on. This includes AI chip stocks and software stocks; some build the powerful computer chips (the digital shovels) while others create the complex software platforms (the digital rulebooks). Investing in a pure-play AI company that builds these tools is a bet on the continued growth of the entire AI trend.
In the other corner are the Users. These companies take the tools from the Builders and apply them to solve a specific problem—like using AI to detect fraud or to help farmers monitor crop health. When you invest in a User, you’re betting on the success of their specific product or service. Many small-cap artificial intelligence companies fall into this category. Their focused nature provides incredible growth potential, but it also introduces a different set of challenges and risks.
What Are the Real Risks of Investing in Stocks Under $20?
It’s tempting to see a sub-$20 price tag and think “bargain!” But investing in these smaller companies is more like betting on a talented rookie athlete than a seasoned all-star. The potential for explosive growth is there, but the journey can be a much bumpier ride. Their stock prices often experience dramatic swings based on news or market sentiment, making them speculative AI investments that require a steady hand.
You also have to ask why a stock is under $20. While you might find an undiscovered gem, a low share price can also be a warning sign. It could signal that the company is facing real business challenges, like struggling to turn a profit or losing out to bigger competitors. This is one of the key risks of investing in AI penny stocks or other low-priced shares; the price might reflect problems, not just potential.
Because of this, smaller companies are more fragile. A single lost contract or a delayed product can have a much bigger impact on their stock than it would on a giant like Google. Understanding the story behind the stock is crucial.
AI Stock Example #1: A Company Giving a Voice to Cars and Restaurants
Our first example, SoundHound AI (ticker: SOUN), is a perfect illustration of a company that uses AI to solve a specific problem. You’ve probably talked to Siri or Alexa, but those voice assistants are part of a massive tech giant’s ecosystem. SoundHound’s goal is to become the go-to independent expert for voice AI, letting any business—from car makers to fast-food chains—add a powerful, conversational voice to its products. This focus makes it one of the more interesting high-potential AI stocks on a budget.
By zeroing in on this niche, SoundHound offers a clear story for investors. It’s a pure-play bet on the idea that voice will be a primary way we interact with technology everywhere.
- What it does: Creates advanced voice AI that allows people to talk naturally to devices, cars, and restaurant drive-thrus.
- Why it’s an AI play: It’s a “User” of AI, applying complex technology to the specific, growing market of custom voice assistants.
- The risk: It faces intense competition from giants like Google and Amazon and is not yet profitable, fitting the “talented rookie” profile we discussed.
AI Stock Example #2: An AI That Watches and Listens for Big Media
While SoundHound puts AI in front of consumers, our next company, Veritone (ticker: VERI), shows how AI can work powerfully behind the scenes. Imagine a TV news network with millions of hours of footage. How do they find a specific clip from three years ago in seconds? Veritone’s technology is the answer. It gives media companies and government agencies a “digital librarian” that can watch, listen to, and understand vast archives of video and audio content, making it instantly searchable.
Think of Veritone as a “Builder” of AI tools. Instead of creating a single product for the public, it provides a powerful platform called aiWARE that other businesses use to solve their own data problems. This represents a bet on the underlying need for AI infrastructure across many industries.
- What it does: Its AI platform, aiWARE, automatically analyzes vast libraries of video and audio content to make them searchable.
- Why it’s an AI play: It’s a “Builder” of sorts, providing a foundational tool for media companies and government agencies.
- The risk: Its business can be complex to understand, and its success relies on securing large, long-term contracts.
AI Stock Example #3: Using AI to Speed Up the Search for a Cure
Moving beyond business operations, some companies are using AI to tackle life’s biggest challenges. Imagine if you could predict which cancer treatment would work for a specific person before they even start it. That’s the moonshot goal of companies like Lantern Pharma (ticker: LTRN), a small firm using AI to rediscover and develop cancer therapies more efficiently.
This is where speculative AI investments enter the picture. Unlike a company selling a finished product, Lantern is betting its future on its AI platform’s ability to find successful drug candidates. The potential payoff if it succeeds is enormous, but the risks are just as large. Think of it less like buying a piece of a stable business and more like funding a groundbreaking scientific experiment where the outcome is all-or-nothing.
- What it does: Uses its AI platform to analyze biological data and predict which cancer patients will respond best to specific drugs.
- Why it’s an AI play: It applies AI to make drug discovery and clinical trials more efficient and personalized.
- The risk: Extremely high. Biotech is inherently speculative, and drugs can fail trials, which can be catastrophic for a stock’s price.
Beyond the Hype: Your 3-Step Plan to Start Investing in AI Smartly
Now that you can look past the sticker price of a stock and ask the right questions—what does this company actually do, and what are the real risks?—you can begin to take deliberate action. Here is a safe, three-step plan to get started.
Your First 3 Steps:
- Investigate: Pick one company mentioned and find its “Investor Relations” page. Can you explain what it does in one sentence after reading their summary?
- Practice: Open a free “paper trading” (practice) account with a major brokerage. “Buy” the stock with fake money to see how it behaves without risking a dime.
- Diversify: When you’re ready to invest real money, never put all of it into one small stock. It’s smarter to spread it across several different companies.
This patient approach is how you find undervalued AI stocks—not by chasing hot tips, but by doing your homework. Each company you research is a chance to build confidence and begin the journey of building an AI stock portfolio as an informed, empowered investor.