The AI Productivity Boom: Why SMEs Are Leading the Surge and Where to Invest Now

The pandemic accelerated a silent revolution: small and medium enterprises (SMEs) are now harnessing AI-driven tools to outpace larger rivals in efficiency, cost control, and innovation. Alan Sheppard, a British entrepreneur who streamlined his logistics firm's operations using AI-powered route optimization and inventory management, embodies this shift. His story—from near-bankruptcy to 15% revenue growth in two years—is no outlier. It's a microcosm of a global trend: SMEs are leveraging AI to rewrite the rules of competition.

The Post-Pandemic AI Surge: Data-Driven Growth

The post-pandemic era has seen SME AI adoption skyrocket. By 2025, 34% of SMEs globally use AI tools, up from just 15% in 2020, driven by falling costs and democratized access. The market for SME-focused AI productivity tools is projected to hit $294 billion by 2025, growing at a 29% CAGR through 2032. Key sectors like retail, customer service, and marketing are leading the charge:

• Retail: AI spending will hit $20.05 billion by 2026, with 80% of retailers aiming to adopt AI-powered automation by 2027.
• Customer Service: Generative AI will handle 70% of interactions by 2025, boosting satisfaction by 30%.
• Marketing: 64% of B2B marketers now view AI as critical for strategy, with e-commerce firms using it to create seamless customer experiences.

Why Now Is the Time to Invest

The surge in demand has created a paradox: while AI adoption is soaring, many companies offering these tools remain undervalued. Their stock prices lag behind their growth potential, making them ripe for investment. Here are five overlooked opportunities:

1. Verint Systems (VRNT): The SME's AI Workforce Ally

• Focus: Customer engagement, workplace management, and hybrid cloud services.
• Why Invest?: Its AI tools reduce operational costs by 20% and improve customer retention. Despite a recent dip to $17/share, analysts see a $30 price target by 2026.
• Risk/Reward: Short-term underperformance (Q3 2025 revenue missed estimates) is outweighed by its 6% annual recurring revenue growth and partnerships with Microsoft Azure.

2. Innodata (INOD): Data Mastery for SMEs

• Focus: AI-driven data management for healthcare, insurance, and marketing.
• Why Invest?: Q1 2025 revenue surged 121% YoY, with EPS jumping 566%. Its role in converting medical records to digital formats makes it a $1.8 billion market cap gem.
• Risk/Reward: Volatility in 2025 (down 2.6%) offers a buying opportunity at ~$15/share.

3. Bill Holdings (BILL): Payment Automation for SMEs

• Focus: Unified payment and procurement platforms.
• Why Invest?: Revenue grew 10x since 2020, yet shares dropped 47% in 2025 to ~$35. Analysts at BTIG see a $60 price target, citing its 10% YoY growth and dominance in SME financial tools.

4. BigBear.ai (BBAI): Analytics Beyond Defense

• Focus: Advanced data analytics, originally for defense but now expanding to SMEs.
• Why Invest?: Q1 2025 revenue hit $34.8 million (+5% YoY), with contracts from the U.S. Department of Homeland Security. At ~$3/share, it's undervalued compared to its $4 price target.

5. SoundHound AI (SOUN): Voice Tech for the Small Business

• Focus: Voice-activated solutions for restaurants, retailers, and automakers.
• Why Invest?: Its AI outperforms Siri and Alexa, with revenue expected to double in 2025. Despite a 35% drop to ~$9/share, its $3.65 billion market cap hints at untapped potential.

The Long-Term ROI Play

The undervaluation of these stocks stems from near-term headwinds: supply chain disruptions, macroeconomic uncertainty, and investor rotation to "safer" sectors. But the long-term picture is clear: SMEs will continue to adopt AI at breakneck speed. By 2030, AI could boost SME-driven GDP by 26%, creating a $15.7 trillion global revenue opportunity.

Investors should prioritize platform giants (e.g., VRNT's Microsoft integration) and niche innovators (e.g., INOD's healthcare data tools). Geographically, Asia-Pacific and EU-focused stocks (like Bill Holdings' Southeast Asia expansion) offer tailwinds from regional AI funding programs.

Final Take: Ride the AI Wave

Alan Sheppard's story isn't just about survival—it's about reinvention. SMEs are using AI to leapfrog competitors, and the companies enabling this transformation are undervalued gems. For investors, the playbook is simple: buy now, hold for 3–5 years, and capitalize on the SME productivity revolution. The ROI? It's already baked into the numbers.

Backtest the performance of SME AI productivity stocks (VRNT, INOD, BILL, BBAI, SOUN) when 'quarterly earnings exceed estimates' and 'hold for 6 months', from 2020 to 2025.

Disclaimer: Always conduct independent research and consult a financial advisor before making investment decisions.