A Unique Smallcap Stock for Your AI Watchlist

"Woe is me" said Albert Einstein, upon hearing the news of the Hiroshima bombing.

"Mr. President, I feel I have blood on my hands," - Oppenheimer.

These were the two of the greatest men in the global scientific community...Both regretting their role in the destructive use of the breakthrough inventions that changed the course of the world.

Oppenheimer even received even flak later for campaigning against hydrogen bomb.

These days, if you hear Geoffrey Hinton, you will hear echoes from the past.

Geoffrey Hinton, a British Computer Scientist, is the pioneer in deep learning models that are at the core of AI. He is also known as the father of AI.

He set the wheels for AI in motion in 1970s with his attempt to simulate neural networks. He was trying to mimic the way a human brain works. The project was primitive then, with no breakthrough results. He was gently asked by his seniors to drop it lest it jeopardized his career.

But fuelled by curiosity and passion, he pursued.

50 years later, his efforts bore fruits. His research has led to chatbots like Google Bard.

With a lifetime of investment, you would expect him to be upbeat on the leaps and bounds made by AI.

But that's not the case. In fact, he is scared.

His fear is that the humans will end up being second most intelligent beings. The first position will be taken over by AI due to their better learning algorithms and the vast data they are getting trained on.

The systems are getting smarter and faster at learning and adapting from the feedback loop. And they are taking the next steps based on all the learnings they have accumulated.

This is exactly how humans make decisions.

So, what's wrong with that?

Well, the issue is, it is becoming too smart for our own good. So much so that it may start taking decisions on its own and may spring out of control and beyond the understanding of people who designed it in the first place.

Hinton has seen this happening. He doesn't know how it has happened and what implications it could have.

Sounds dystopian? Well, it could be.

While there could be revolutionary developments in areas like healthcare, advance diagnostic, and drug design, automation. Think of one-man restaurant where machines take and serve the order and prepare the meal too, while a single human oversees it.

The fallouts could be equally bad. Think of fake news, manipulating electorates, wars, mass unemployment, identity thefts, and disasters that we can't even imagine now.

Before it gets too late, Hinton wants to send the message. Such is his seriousness that he has said goodbye to his career at Google.

• "I want to talk about AI safety issues without having to worry about how it interacts with Google's business. As long as I'm paid by Google, I can't do that."

AI is the future, whether or not we are ready for it and irrespective of how you feel about it. The individuals, companies and economies cannot afford to not engage in this revolution.

As a distinguished tech expert recently phrased it - Its AI or Die.

As investors, we have seen the huge wealth that the rise of AI can bring in its wake.

A case in point is Nvidia - AI chipmaker that recently beat Apple in marketcap and became the world's most valued tech company.

We don't have chipmakers in India yet. But then this AI story is not limited to chips.

The inventory for AI is data. India with its huge population has loads of it. So, wherever there is any opportunity to collect it, store it, analyse it, use it, protect it or compute it, AI riches are possible.

Think of physical infrastructure - data centers, transformers, cables, real estate, cooling equipment, cloud infra, global hyperscalers, and emerging players in India like E2E networks.

Here is a video I would highly recommend you watch.

By the way, I recently recorded a video on Indian stocks trading below book value. You can check it out on Equitymaster's YouTube channel.

Today I want to dive deeper into a specific smallcap company that has created a successful business model using data and AI.

Affle (India) Ltd is an adtech company that delivers consumer recommendations and conversions through relevant mobile advertising for leading global brands.

The business is focused more on emerging economies where the population is high, and penetration is less.

Affle has multiple mobile tech platforms like consumer intelligence platform for consumer recommendations and conversions through relevant mobile advertising, in-house data management platform (DMP) for targeting based on user data etc.

Its AI driven platform uses realtime predictive algorithm to target and convert users.

What makes Affle unique in a crowded market is its CPCU (cost per converted user) model. Here, the company charges its clients only if the desired action happens (for instance buying or signing up for something), unlike others who charge based on clicks.

This model allows the company to charge better rates and offers better return on investment for its clients/advertisers. A win win situation for both.

It has been offering products with GenAI capabilities, including vernacular content creation, keyword recommendations, and operational cost optimization. It has filed 15 unique patents related to GenAI.

The company's key focus areas include fast growing categories like ecom, entertainment, edtech, fintech, gaming, foodtech, healthtech, travel etc.

All of these are fast growing industries and make the business well diversified across industries.

The company enjoys healthy return ratios of over 15% and a balance sheet with minimal debt.

At a PE of over 60x, it may not seem cheap. But given the high growth prospects, the rise of connected devices and shift in consumption patterns, this is one stock I would highly recommend putting on your AI watchlist.

Do note that this is not a stock recommendation.

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Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)