These are the small-cap AI plays to know

As the AI boom continues to captivate investors, attention is shifting to small and mid-cap space opportunities. TD Cowen deputy head of research Lisa Thomas joins Catalysts to shed light on promising AI investment plays beyond the usual Big Tech names.

Thomas suggests that investors looking to enter the AI trade should consider data center plays such as Credo (CRDO) or DigitalBridge (DBRG). She says these companies offer "really good opportunities" for portfolio diversification with significant upside potential.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video transcript

Big names like NVIDIA have obviously really ruled this A I surge.

What smaller names should investors be taking a look at if they do want to play A I but in the smaller and mid cap space?

Yeah, again, we think that some of those names like Credo, which we just upgraded or or digital bridge are great ways to play um the data center and we just had uh our entire technology team out with, I think it was a 400 plus page report out of TD Cowan on you know, the data center and all of the elements of data center or investment that people uh should be focused on because you know, whether it is looking to the power constraints uh that are going to be driven by this huge surge in data center reliance or whether it's in the speed enablers and the uh data center architecture enablers such as Credo or whether it's in looking at a broader portfolio of names around digital infrastructure where you have an opportunity to be leverage to a number of really high quality names through uh an investment in digital bridge.

We think those are really really good opportunities.

They still have a lot of upside, you know, as you point to, you know, large cap stocks have really outperformed.

And of course, it's been really a very small number of stocks within the large cap space, uh the magnificent seven and even a smaller concentration within that, that is outperformed.

So we think the timing of this piece is great because investors really are taking a step back looking at SMS which are undervalued or certainly seeing a near historic valuation gap versus large caps.

And they're really asking whether this is an opportunity to broaden out, broaden out their portfolios and potentially broaden out the rally.

Uh so that more folks in the market and more stocks in the market are participating in it.

All right, we're gonna have to leave it there, Lisa, thank you so much for joining us.

That was Lisa Thomas TD Cowan is Deputy head of research.