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Retail investors are piling into small-cap firms that employ artificial intelligence amid intensifying competition between tech titans Google<\/a> parent Alphabet and Microsoft<\/a> to secure leadership in the next big driver of growth.
The viral success of ChatGPT<\/a> has turned the spotlight on AI on Wall Street, reminiscent of the blockchain hype from a few years ago when shares of companies remotely associated with the technology surged.
The $3-billion AI software firm C3.ai was the fifth most actively traded on Fidelity's platform for small investors on Monday, while drawing record daily retail inflows worth $31.4 million, as per Vanda Research<\/a>.
\"Small-cap firms have AI as a much larger part of their business than the larger ones,\" said Matthew Tuttle, chief executive officer of Tuttle Capital Management on the reason behind retail investors' focus on the smaller firms.
Tuttle said he had shorted C3.ai shares about a week ago, but was looking to switch to the long side because \"that's where the action is.\"
SoundHound AI, which offers a voice AI platform services, and Thailand's security firm Guardforce AI have more than doubled so far this year, while analytics firm BigBear.ai gained nine-fold in value.
\"We are in a new and exciting AI arms race right now, and speculative investors are clearly trying to find the potential winners in the increasing growing caldron of AI adjacent companies,\" said Arthur Hogan, chief market strategist at B.Riley Wealth.
Shares of Microsoft, which backs ChatGPT parent OpenAI<\/a>, gained 1.5% in premarket trading ahead of the AI launch later in the day.
Google-owner Alphabet Inc<\/a> on Monday said it would launch a chatbot service Bard and more artificial intelligence for its search engine as well as developers.
Microsoft is in a strong position in the AI race due to the combination of its close partnership with OpenAI and its Azure capabilities around compute and data, said Barclays analyst Raimo Lenschow.
U.S.-listed shares of Baidu Inc climbed nearly 15% on Tuesday after the Chinese search engine said it would complete internal testing of a ChatGPT-style project called \"Ernie Bot<\/a>\" in March. Earlier in the day, a clutch of Chinese AI stocks had also rallied.
\"There will clearly be winners and losers in the markets current new thing AI, but it will also take some time to ascertain how all these artificial intelligence focused companies plan on monetizing this exciting new technology,\" Hogan said.
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