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AI Small Caps Investors Are Watching Butterfly Network SoundHound AI And Penguin Solutions

Simply Wall St · 1d ago

AI is no longer just a big tech story. It now sits at the crossroads of inflation debates, interest rate decisions, and shifting credit conditions across the US, Europe, and Asia. As central banks weigh wage growth, energy costs, and housing signals, investors are looking for growth that is less tied to broad market indices and more to real adoption of machine learning, automation, and data intelligence. This article focuses on AI Small Caps, where early-stage ideas can still move the needle. You will see three stocks from our AI Small Caps screener that stand out in this theme.

Butterfly Network (BFLY)

Overview: Butterfly Network is a medical device company that sells handheld ultrasound scanners and supporting software that run on smartphones, tablets, and hospital systems, aiming to make imaging more portable and accessible. Its Compass AI and ScanLab platforms add workflow tools and AI guidance that can help clinicians capture and interpret scans more consistently across settings.

Operations: Butterfly Network generates about US$102.9 million in revenue from its AI enabled personal ultrasound solution, with around US$81.8 million from the United States and US$21.2 million from international markets.

Market Cap: US$1.8b

Investors looking at AI small caps may find Butterfly Network interesting because it sits at the intersection of medical hardware, software and licensing. The company focuses on its ultrasound on chip technology, the Compass AI platform and a growing embedded and licensing model, including a five year agreement with Midjourney that includes upfront, annual and potential milestone payments. At the same time, the stock carries clear risks. It is currently loss making with a high P/S multiple and has seen sizeable insider selling through 2026, even though key insiders still hold large positions. With expansion into markets like Brazil and management reiterating 2026 guidance, some investors may focus on whether future execution will align with current expectations.

Butterfly Network’s ultrasound on chip story is bigger than a single product launch, and the real hinge point sits in the 1 key reward and 2 important warning signs (1 is major!)

NYSE:BFLY Earnings & Revenue Growth as at Jul 2026
NYSE:BFLY Earnings & Revenue Growth as at Jul 2026

SoundHound AI (SOUN)

Overview: SoundHound AI builds independent voice AI platforms that let car makers, restaurants, device manufacturers, and customer service teams plug conversational assistants into their products, using its own tools for speech recognition, natural language understanding, and generative AI. The company aims to power voice driven experiences across cars, phones, call centers, kiosks, and other connected devices without relying on big tech ecosystems.

Operations: SoundHound AI generates about US$184 million in revenue, all reported under Internet Software & Services, with most coming from the United States at roughly US$122.3 million.

Market Cap: US$2.8b

Investors hunting for AI small caps with real products in market may find SoundHound AI interesting because its voice platforms already sit inside cars, restaurants, and customer service channels, and recent partnerships like Deliverect and Richtech Robotics point to new ways to monetize those agents. At the same time, the company is still reporting sizeable losses, is expected to remain unprofitable over the next few years, and trades on a high P/S multiple, while planning a US$300 million follow on equity raise that could dilute existing holders. The real question for readers is whether SoundHound AI’s agentic AI vision and LivePerson deal can eventually outweigh these funding, execution, and valuation pressures.

SoundHound AI’s agentic voice story is accelerating, while losses and dilution worries still hang over the stock. Get the full picture in the analyst forecasts for SoundHound AI before the next chapter of this rollout becomes clearer.

NasdaqGM:SOUN P/S Ratio as at Jul 2026
NasdaqGM:SOUN P/S Ratio as at Jul 2026

Penguin Solutions (PENG)

Overview: Penguin Solutions is an enterprise hardware and services company that builds AI ready computing, memory, and LED systems for data centers, edge sites, and OEM customers. It combines its OriginAI infrastructure, Stratus always on platforms, SMART Modular memory, and Cree LED components into tailored solutions for high performance workloads.

Operations: Penguin Solutions generates about US$1.50b in revenue, with roughly US$715.4 million from Integrated Memory, US$543.1 million from Advanced Computing, and US$244.2 million from Optimized LED.

Market Cap: US$2.47b

Penguin Solutions operates within the AI infrastructure build out, with about three quarters of sales tied to AI related businesses and a mix of OriginAI platforms and SMART Modular memory that analysts describe as supporting earnings and revenue growth. Some valuation models indicate that the stock price has moved ahead of certain estimates, while its P/E remains below the broader semiconductor peer group. Analysts have also noted upside potential and raised guidance following stronger bookings and margin ambitions. At the same time, investors need to consider insider selling, questions around earnings quality related to non cash items, and a reliance on higher risk external funding and less predictable project deals, which together form a key part of the story for those evaluating the durability of this AI roll out.

Penguin Solutions sits at the heart of the AI build out, yet its mix of OriginAI platforms, SMART Modular memory, insider selling and funding questions is easy to underestimate. The 4 key rewards and 3 important warning signs (2 are major!) could reveal what the recent momentum might really be pricing in.

NasdaqGS:PENG P/E Ratio as at Jul 2026
NasdaqGS:PENG P/E Ratio as at Jul 2026

The three AI small caps in this article are only a starting point, and the full AI Small Caps screener surfaces 30 more companies with equally compelling narratives around machine learning, automation, and data intelligence. Use Simply Wall St to identify and analyze the specific catalysts, business models, and risk profiles that match your own AI thesis so you can focus on the highest conviction opportunities.

Take Control of Your Investment Journey

If Penguin Solutions or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.