When I invest in artificial intelligence stocks, I look for low-market-cap companies with high revenue growth. That basic formula points me toward growth stocks that haven't yet become household names. That strategy explains why these two AI stock picks are among the largest positions in my portfolio. If you have $1,000 (or more) that you're ready to put to work in the stock market today, they're worth a look.
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1. Iren
Iren (IREN +2.30%) builds AI data centers that provide critical compute for hyperscalers. It has already signed long-term deals with Microsoft (MSFT +1.36%), Nvidia (NVDA +0.73%), and various AI enterprises. That customer validation and Iren's knack for building AI data centers on time position it as one of the top neoclouds.
NASDAQ: IREN
Key Data Points
A look at the key numbers indicates how big its opportunity could become. Iren reported $137.2 million in revenue for its fiscal 2026 fourth quarter, which ended June 30. That was down 27% year over year, and that fact in isolation might make Iren seem like a bad business to invest in. However, it's on track to reach $4 billion in annual recurring revenue by the end of the calendar year. That means the revenue growth rate will go up substantially in future quarters.
Iren's revenue comes from providing AI compute capacity to tech leaders. It's getting annual contract values above $20 million per megawatt, with short-term deals currently being negotiated at $25 million per megawatt. Iren has a 5,800-megawatt pipeline, so once all of the projects it's developing are brought online, the entire portfolio could generate $145 billion in annual recurring revenue, assuming the $25-million-per-megawatt rate holds.
Megawatt prices have more than doubled in less than a year, so the types of contracts Iren can command may be much higher by the time it brings capacity online. Iren is on track to deliver an additional 800 megawatts in 2027, with large customer prepayments covering a large percentage of capital expenditures.
2. Netlist
Netlist (NLST +14.87%) trades as an over-the-counter (OTC) security rather than being listed on a national exchange. Back in 2018, when its share price sank consistently below $1, management chose to allow the company to be delisted from the Nasdaq rather than performing a reverse stock split. Today, after a year-to-date gain of more than 500%, it trades at around $5.50.
OTC: NLST
Key Data Points
Buying OTC stocks can be a bit riskier, as they are not subject to the same regulatory standards as those traded on the major exchanges, and may not reveal as much of their business and financial data. Moreover, not all OTC stocks have solid business models. However, Netlist more than doubled its revenue year over year, driven by memory product sales and royalties. If it relists with Nasdaq in the future, a meaningful rerating may occur.
While Netlist's CXL products could eventually be a major part of revenue growth, litigation is the main catalyst driving its growth right now. Netlist has accused memory chip giants of infringing multiple patents for key products.
Its success in these patent lawsuits so far has already translated into meaningful revenue, including a landmark five-year deal with Samsung (SSNLF +0.00%) that will pay Netlist approximately $27.5 million per quarter. That deal also came with a $200 million up-front license fee and the ability to buy $300 million in memory products from Samsung annually for the next five years, giving Netlist some insulation from supply shortages.
Netlist has SK Hynix (SKHY -4.13%) in a similar arrangement and should renew the deal this year. Most of those royalties are pure profit. Micron (MU +0.04%) has been a holdout in these negotiations, but a $445 million verdict in Netlist's favor, the looming threat of cease-and-desist orders, and a recently announced U.S. International Trade Commission investigation into Micron and others concerning Netlist patents suggest a lucrative resolution is on the way.
