The AI Investing Pulse

August 14, 2025

In this Week’s Edition:

1. Analysis - Two small-cap AI stocks flying under the radar

2. Stock Ideas - Missed Nvidia? 9 undiscovered AI stocks haven't taken off... yet

3. News - Technology and AI stocks are doing something not seen in over 25 years

4. Startups - Alumni Ventures launches AI First Fund to invest in AI native startups

5. Trends - How AI agents are quietly transforming the business operations landscape

6. Other News - Chatgpt 5: The future or just hype?

Two Small-Cap AI Stocks Flying under the Radar

In the fast-moving world of AI investing, smaller companies can often deliver the biggest surprises. While large-cap names dominate the headlines, real pockets of growth frequently emerge further down the market-cap spectrum — where innovation, niche leadership, and accelerating adoption can create outsized opportunities.

This week, we are looking at two small-cap companies making decisive moves within their AI niches. Each has been evaluated using our AIIP (AI Investing Pulse) Methodology* — our proprietary Growth & Momentum model for identifying top-performing AI stocks based on both fundamental strength and relative market performance.

1. Evolv Technologies Holdings, Inc. $EVLV ( ▼ 1.44% )  

• Sector / Industry: Industrials / Security & Protection Services

• AI Stack Layer: Application & Edge (AI in Security, Physical Threat Detection)

• Market Cap: $1.2B

• YTD Performance: 90%

• Profitability: ❌ Not currently profitable

• AIIP Scores:

  • Total Score: 74 / 100

  • RS Score: 89 / 100

• Ranking Status: ✔️ Watchlist

🧠 What the Company Does
Evolv specialises in AI-powered physical security. Its advanced screening systems combine artificial intelligence and sensor fusion to detect weapons and threats in real time — without the bottlenecks of traditional metal detectors. This allows for seamless, high-throughput security checks in busy environments such as stadiums, schools, and transport hubs. Its strengths lie in scalability, instant threat detection, and the growing demand for non-invasive public safety solutions. In simple terms, Evolv’s technology acts like a super-smart security guard that can spot dangerous items as people walk past — keeping crowds moving quickly while still keeping them safe.

💡 Why It Stands Out
With a Total Score of 74 and RS of 89, Evolv now sits comfortably on our Watchlist. Projected revenue growth of 23.5% is paired with an EPS growth forecast of 70.1%—a sign the company is moving meaningfully closer to breaking even and potentially reaching profitability. Its latest earnings showed quarterly revenue up 41.4% year-on-year, reflecting accelerating adoption across sectors from entertainment to critical infrastructure.

📊 Technical View
Evolv is trading above all key moving averages, reinforcing its underlying uptrend. However, the price is approaching a potential double-top formation, with resistance near the highs last seen in 2023, around $8 — a key level to monitor for either a breakout continuation or a pullback.

2. Cerence Inc. $CRNC ( ▼ 6.2% )  

• Sector / Industry: Technology / Software – Application

• AI Stack Layer: Application & Edge (AI in Automotive, Voice Assistance)

• Market Cap: $586M

• YTD Performance: 72%

• Profitability: ❌ Not currently profitable

• AIIP Scores:

  • Total Score: 60 / 100

  • RS Score: 96 / 100

• Ranking Status: 📈 Momentum

🧠 What the Company Does
Cerence develops AI-powered voice assistants for vehicles, enabling natural language conversations between drivers and their cars. Operating in the Application & Edge layer of the AI stack, its software underpins infotainment, navigation, and vehicle control systems — delivering hands-free convenience and enhancing safety in modern mobility. In simple terms, Cerence lets you talk to your car as if you were speaking to a person — whether you want to play music, get directions, or adjust settings, all without lifting a finger.

💡 Why It Stands Out
Cerence’s RS score of 96 puts it among the week’s strongest momentum names. While its fundamentals (Total Score: 60) fall short of our Watchlist threshold, its positive forward PEG ratio suggests that growth expectations are not yet fully priced in. Combined with steady revenue and EPS growth trends, the business appears to be moving closer to profitability — a key milestone for small-cap tech firms competing in fast-moving markets.

📊 Technical View
Cerence is showing strong upward momentum, with moving averages sloping higher and price trading above them on both daily and weekly charts. Yesterday’s 24% surge broke the stock out of a long parallel channel that began in April.

🔍 Final Take

Evolv and Cerence illustrate why small-cap AI stocks deserve attention. Evolv has graduated to Watchlist status, showing a compelling combination of revenue acceleration, improving fundamentals, and strong market momentum in AI-powered security. Cerence, meanwhile, is a pure momentum play with a high RS score, attractive valuation, and a clear path toward profitability in automotive AI voice technology.

Both highlight that in AI, size isn’t everything—execution, adoption, and niche leadership can be just as powerful. Macro factors and disciplined risk management remain essential when tracking these opportunities.

_{Disclaimer - This content is provided for informational purposes only and does not constitute investment advice, personal recommendations, or an invitation to engage in any investment activity. The information presented is derived from publicly available sources and should not be solely relied upon for making investment decisions. Always consult with a qualified financial professional before making investment choices. Past performance is not a guide to future performance.}

_{*Methodology & Scores - All scores are proprietary and calculated using data from Finbox (powered by S&P Global Intelligence). Total Score combines metrics for Sales and EPS Growth, Financial Quality, and Valuation, to assess overall business strength (out of 100). Relative Strength (RS) Score measures a stock’s price performance relative to the AI universe (173 AI-focused public companies). Ranking Status is assigned based on score combinations: Fundamental: Total Score ≥ 70, RS < 80. Momentum: RS ≥ 80, Total Score < 70. Watchlist: Total Score ≥ 70 and RS ≥ 80.}

TOP AI STOCKS PERFORMANCE

TOP AI ETFs PERFORMANCE

AI STOCKS IDEAS 

Missed Nvidia? 9 undiscovered AI stocks haven't taken off... yet - IBD

This underrated AI stock is profitable yet overlooked - The Motely Fool

The dark horse AI stock with great news for investors - The Motley Fool

AI STOCKS & ETFs NEWS 

Technology and AI stocks are doing something not seen in over 25 years - The Globe and Mail - Recent trends in technology and AI stocks signal unusual behaviour not witnessed in over 25 years, prompting concerns about potential market implications.

Trump’s Deal With Nvidia and AMD Raises Legal and Trade Concerns - CNBC - Trump’s agreement requires Nvidia and AMD to pay 15% of certain AI chip sales to China for export licenses, sparking legal challenges and fears of undermining U.S. competitiveness amid AI-related geopolitical tensions.

Software stocks in Europe fall on concerns over AI pitfalls - Reuters - Software stocks in Europe declined on August 12, 2025, influenced by AI risks, with SAP falling over 6%. Other companies faced losses between 4% and 10%, mirroring similar trends in the U.S.

AI STARTUPS

Alumni Ventures launches AI First Fund to invest in AI native startups - citybiz - Alumni Ventures has introduced the AI First Fund, dedicated to investing in AI-native startups that integrate AI as a core element of their business models.

AI startup perplexity makes bold 34.5 billion bid for google’s chrome browser - The Economic Times - AI startup Perplexity has offered $34.5 billion to acquire Google’s Chrome browser amid antitrust scrutiny. The proposal includes maintaining Google as the default search engine and additional investments for browser development.

The state of AI 2025 - BVP - Bessemer Venture Partners’ 2025 report notes rapid Vertical AI adoption in service-heavy industries and predicts the browser will become the primary interface for agentic AI. Generative AI continues to enhance innovation and investment across various sectors.

AI TRENDS

The agentic shift: how AI agents are quietly transforming the business operations landscape - inkl - Agentic AI systems autonomously manage complex workflows, enhance operational efficiency, and adapt to changes, driving next-generation automation across industries.

AI trends 2025: strategic integration and sustainable advances - WPN - Key AI trends for 2025 include strategic integration of sustainable practices, AI governance, the rise of blockchain, and enhanced technologies like 5G and IoT.

OTHER

Chatgpt 5: The future or just hype? - Geeky Gadgets - GPT-5 enhances ChatGPT with a unified system for quick and deep responses, increased usage limits, and improved safety measures, though it remains a refinement rather than a drastic improvement over previous models.

IBD elite 2025: how independent wealth firms use AI - Financial Planning - Eight independent wealth management firms are using AI to enhance client services and boost operational efficiency, reflecting a significant trend in the wealth management industry toward technological integration.

_{Disclaimer - The information contained on this newsletter does not constitute investment advice or a personal recommendation, nor is it an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investments, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all. The information presented is based on publicly available data and sources believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Market conditions can change rapidly, and the information provided may no longer be up to date. This content is for informational purposes only and should not be construed as financial, legal, or tax advice. Data sources: S&P Global Market Intelligence}