Meet the Small-Cap Chip Stock That Is a Tiny Fraction of Nvidia's Valuation and That Just Posted 59% Revenue Growth Due to AI-Driven Demand

Nvidia (NVDA 1.65%) is the most valuable company in the world, with a market cap of $5.4 trillion. Demand for its leading chips has been through the roof, making the tech giant at the center of the artificial intelligence (AI) revolution that’s currently taking place.

Some investors, however, may balk at the idea of buying into a stock that’s already trading at such a high valuation. As good as Nvidia’s business may be after all, investors may be growing concerned that the stock may be approaching a peak.

If you’re in search of other potential AI stocks to buy, which may have more upside, you may want to consider Ambiq Micro (AMBQ 4.15%). It’s a minnow compared to Nvidia, but given its recent financial performance, you may want to consider buying this small-cap stock.

Ambiq’s sales skyrocketed 59% last quarter

Ambiq has a market cap of $1.5 billion, and that’s with the tech stock soaring 150% already this year. There was a sudden surge after the company posted its recent earnings results last week, which highlighted what could be the next big growth opportunity in tech: edge AI.

Rather than sending AI requests to the cloud, doing it on the actual device is what’s referred to as edge AI. And this is where Ambiq can thrive. It makes ultra-low-power semiconductors that can be critical for edge AI. The company says it has now powered more than 300 million devices to date. As privacy and security grow in importance in AI, edge AI is likely to come into greater focus.

The company has been experiencing a surge in demand, with sales rising by a little over 59% during the first three months of the year, with its top line totaling $25.1 million. It did, however, incur a loss of $10.2 million, which was larger than the $8.3 million loss it incurred in the prior-year period.

Is Ambiq’s stock worth the risk?

Ambiq’s business isn’t profitable, and its bottom line didn’t improve despite the surge in sales. Meanwhile, its top three customers also accounted for 71% of net revenue, which can make it highly vulnerable and dependent on just a few customers.

This is a stock that looks as though it should have some promising potential as AI needs evolve. But as with many small-cap stocks, there’s plenty of risk and uncertainty here. I wouldn’t rush to buy it simply because of its heavy exposure to just a few customers, but it’s definitely a stock worth watching. If it’s able to continue to show strong growth while also diversifying its customer base, it could be worth loading up. But for right now, I think it may still be a bit too risky to buy at this stage.