Two Artificial Intelligence Stocks Under $5: Emerging AI Software Opportunities

The artificial intelligence boom has primarily benefited infrastructure providers—chip manufacturers and data center operators. But what about the software companies building AI applications? Recent market analysis highlights two smaller-cap players that are pursuing AI solutions in specialized verticals, both trading under $5 per share. These companies represent a different investment thesis: not AI infrastructure, but AI-powered tools designed to solve real-world problems in regulatory oversight and healthcare.

FiscalNote (NOTE): Policy Intelligence Meets Regulatory Software

FiscalNote Holdings, Inc. operates as a technology platform delivering global policy and market intelligence to enterprises. The company’s software enables organizations to monitor regulatory developments, manage policy exposure, and mitigate geopolitical and market risks in real-time. With a market capitalization of approximately $168 million, FiscalNote offers an intriguing entry point into artificial intelligence stocks for value-conscious investors.

From a valuation perspective, FiscalNote trades at less than 3x price-to-sales—a significant discount compared to many established AI software companies trading at 10x sales or higher. The firm carries a Zacks Rank #3 (Hold) designation, reflecting analyst consensus on its balanced risk-reward profile. For investors seeking exposure to AI applications in regulatory and policy intelligence, this represents an affordable artificial intelligence stock with moderate analyst coverage.

The company’s focus on regulatory data and policy analysis taps into a growing corporate need: navigating complex compliance landscapes across multiple jurisdictions. As governments worldwide expand regulatory frameworks, demand for AI-powered policy monitoring continues to rise.

iCAD (ICAD): Healthcare AI for Breast Cancer Detection

iCAD Inc. represents a different niche within AI software: medical technology. With a market cap of $52 million, iCAD offers the ProFound Breast Health Suite—an AI-driven platform for mammography analysis, breast cancer detection, and risk assessment. The software is deployed across more than 50 countries and supports thousands of healthcare providers serving millions of patients globally.

Recent financial performance demonstrates solid momentum. In the third quarter, iCAD reported revenue growth of 4% to $4.2 million, accompanied by impressive gross profit margins of 86%—a testament to the quality of its AI-powered software solution. At 2.7x price-to-sales, iCAD joins FiscalNote as an attractively valued artificial intelligence stock relative to peer companies in the software technology sector.

Healthcare AI represents one of the most tangible AI applications globally. Unlike speculative AI use cases, breast cancer detection tools directly impact patient outcomes and clinical workflows. This practical application provides iCAD with sustainable revenue potential and regulatory tailwinds.

Why Small-Cap AI Software vs. Chip Infrastructure?

The investment community continues debating whether AI infrastructure companies (semiconductor manufacturers, data center operators) or AI application software represent superior long-term opportunities. While infrastructure providers like NVIDIA have delivered exceptional returns—surging over 800% since becoming recognized as key enablers of the AI revolution—the tools built on top of that infrastructure deserve consideration too.

Small-cap AI stocks focused on software applications offer several advantages: niche market dominance, higher profit margins, and less competition from mega-cap technology firms. However, they also carry liquidity risks and require more thorough due diligence. Both FiscalNote and iCAD exemplify this trade-off: significantly cheaper than large-cap AI stocks, yet less widely covered by analysts.

The semiconductor industry itself is projected to expand dramatically from $452 billion in 2021 to $803 billion by 2028, reflecting sustained demand for AI computing infrastructure. This growth creates a rising tide for application software as well—more AI infrastructure means more opportunities for developers building intelligent tools.

Should These AI Stocks Be on Your Radar?

The two artificial intelligence stocks under $5 discussed here represent contrasting applications of AI technology: one focused on regulatory intelligence, the other on healthcare diagnostics. Neither company has achieved household-name status, which creates both opportunity and risk.

Investors considering these names should weigh several factors: market size for regulatory software vs. healthcare AI, competitive positioning, profitability timelines, and the risk of AI disruption from better-funded competitors. These are smaller, more speculative artificial intelligence stocks compared to mega-cap equivalents—suitable primarily for investors with higher risk tolerance and the conviction to research deeply into niche markets.

For those building a diversified AI exposure strategy, exploring smaller-cap opportunities in addition to blue-chip semiconductor plays may provide interesting asymmetric risk-reward profiles.