Hidden Gem: This Profitable AI Stock Is Flying Under Retail Investors’ Radar

Wall Street's best-kept secret? A cash-flow-positive AI play that Main Street hasn't noticed—yet.

The stealth AI disruptor printing money

While meme-stock traders chase hype, this under-the-radar tech firm keeps delivering quarter after profitable quarter. No flashy CEO tweets, just relentless execution in the booming AI infrastructure space.

Why the smart money's piling in

Institutional ownership jumped 47% last quarter while retail investors were busy with the latest crypto shitcoin. The company's patented neural acceleration tech gives it a 2-3 year moat—and the financials to back it up.

The cynical take

By the time Robinhood traders notice, the big funds will have already taken their 10x gains. But hey—at least you'll get a nice entry point after the next market panic.

$7.5 billion and counting

Since IBM kicked off its generative AI strategy, the company has booked more than $7.5 billion worth of business. Around 80% of this total comes from the consulting business, with the rest coming from software. Playing a supporting role is hardware, namely IBM's decades-old mainframe business.

IBM's consulting-forward strategy works because enterprise clients need more than software. IBM's watsonx platform provides the software tools necessary for clients to develop, fine-tune, deploy, and govern AI agents and applications, but implementation services and other offerings from the consulting business are equally important. A client who uses AWS and Azure for cloud computing may want to deploy watsonx on those platforms, for example, requiring a complex solution that IBM can provide.

IBM does train its own AI models, but the focus is on speed, safety, and cost. IBM's Granite family of models are designed to be fine-tunable for specific tasks. They're open source, perform well in safety benchmarks, and are cost-effective for businesses. In terms of performance, Granite beats competing AI models of similar complexity in a variety of benchmarks.

IBM's mainframe business shouldn't be ignored. Major industries including financial services still depend heavily on IBM's mainframe systems, and the latest z17 model brings some serious AI firepower. The z17 is designed for more than 250 distinct AI use cases, ranging from loan risk mitigation to medical image analysis, and it can handle 450 billion AI inferencing operations per day with response times of one millisecond. For enterprises needing real-time AI inferencing and rock-solid reliability, IBM's mainframes continue to be the best option.

Importantly, IBM's AI strategy doesn't depend on AI technology making exponential gains in capabilities, or on ever-increasing AI infrastructure investments. Because IBM is focusing on delivering AI solutions that help companies reduce costs or boost efficiency, demand should hold up even if the AI frenzy cools off. As it stands today, AI is incredibly useful for businesses, and IBM is playing a critical role in enabling enterprises to tap into the technology.

Surging free cash flow

After a decade of uninspiring results and inconsistent revenue growth, IBM has settled into a groove. The company has shed slow-growing businesses and bet on its hybrid cloud computing and AI platforms. Revenue is not only growing again but accelerating, and profits are improving.

Image source: Getty Images.

For 2025, IBM expects revenue at constant currency to grow by at least 5%. That may not seem all that quick, but IBM is still a sprawling company with numerous product and service offerings, and it's currently facing a slowdown in demand for discretionary tech projects. Some parts of IBM are growing slowly, and some, like AI, are growing much faster.

IBM also expects to generate more than $13.5 billion in free cash FLOW this year, up from $12.7 billion in 2024. That's solid growth, particularly given the unpredictable economic developments so far in 2025. Strong growth for IBM's high-margin software business, its largest segment, is helping the cause. Software revenue grew by 8% in the second quarter and managed a segment operating profit margin of 31.1%.

With solid profits, a return to reliable revenue growth, and an AI strategy that's working well with its enterprise client base, IBM is an AI stock that all investors should seriously consider.