Investors Abandoned These 3 AI Stocks Too Early, Says Jeff Clark

Why It Matters

These stocks offer entry points where fundamentals outpace market sentiment, presenting potential outsized returns as capital rotates from over‑hyped AI names. Investors who can tolerate near‑term volatility may capture gains when the broader AI rally stabilizes.

Key Takeaways

• Figma’s revenue grew 10c EPS vs 17c loss expectation.
• Figma’s YoY user growth exceeds 50% and net retention 139%.
• Kratos posted 22.6% quarterly revenue growth with record backlog.
• Kratos earnings expanding >45% annually, entry target $45‑$50.
• SoundHound AI trades at $8, scaling voice AI across automotive and kiosks.

Pulse Analysis

The AI boom has driven a wave of enthusiasm that lifted semiconductor and software stocks to lofty valuations, but the market’s breadth is narrowing as new‑low listings outpace new‑highs. TradeSmith’s Jeff Clark sees this as a classic rotation signal: capital fleeing the hottest names must find new homes, often in stocks that were prematurely abandoned. In this environment, investors who look beyond headline hype can uncover opportunities where fundamentals remain strong while sentiment has turned overly cautious.

Figma, Kratos Defense, and SoundHound AI each illustrate that pattern. Figma’s design platform is now embedding generative AI tools, fueling over 50% year‑over‑year user growth and a net dollar retention of 139%, while its latest earnings posted a 10‑cent profit against a 17‑cent loss forecast. Kratos, a pure‑play drone and hypersonic systems supplier, reported 22.6% quarterly revenue growth and a backlog that supports earnings expanding north of 45% annually, yet its share price has retreated to a range that offers a discount to its growth trajectory. SoundHound AI, despite a volatile swing from $8 to the low $20s, now trades at its pre‑AI‑mania level, with its conversational‑AI voice layer gaining footholds in automotive infotainment and restaurant kiosks, positioning it for a longer‑term voice‑AI infrastructure play.

For the disciplined investor, the key is timing and risk tolerance. These companies are not cheap in a Graham‑style sense, but they present growth‑oriented valuations that contrast sharply with the over‑priced AI hype stocks dominating headlines. Entering near $20 for Figma, $45‑$50 for Kratos, or $8 for SoundHound could yield outsized upside if the anticipated rotation materializes and the broader AI market steadies. However, investors must remain mindful of execution risk, especially for SoundHound, which still faces a path to profitability. Balancing patience with selective exposure may allow portfolios to capture the upside of these underappreciated AI‑adjacent plays.