AI Stocks For Investors Looking Beyond Chips And Into Cash Generative Software

German 10 year Bund yields are at multi year highs, so the market is rewarding companies that can raise productivity without relying on cheap capital. Artificial intelligence is one of the clearest ways to do that, from chips to cloud to ChatGPT styled software. This article looks at three stocks from our AI Stocks screener that show how different parts of the AI stack can benefit from that demand.

The three stocks below are only a starting sample from the AI theme. The full screen surfaced 15 more companies with similarly detailed AI narratives that are not covered here. To identify and analyze the highest conviction plays across chips, cloud, and AI software, head straight into the Artificial Intelligence/ AI Stocks screener.

Cerillion (AIM:CER)

Overview: Cerillion is a telecom billing and customer management software company whose strongest AI link is its Business Insights platform, which uses machine learning to turn customer, usage and revenue data into practical actions for telecoms and subscription businesses, alongside its Enterprise Product Catalogue that is described as an AI platform. For investors looking at the AI and ChatGPT theme beyond pure chips, Cerillion offers exposure to AI powered analytics embedded directly in the billing and operations stack.

Operations: Cerillion generates most of its revenue from Software at £22.6 million and Services at £17.8 million, with a smaller £2.0 million contribution from Other income streams.

Market Cap: £285 million

Cerillion provides exposure to the AI theme through its Business Insights and AI enabled product catalogue, which help telecom and subscription clients use machine learning to refine pricing, reduce churn and launch new services without rebuilding core systems. The company reports a record £82 million back order and a £271 million pipeline. Recent half year figures show revenue and profit fell as license revenue moved into later periods, so earnings can be uneven. Large projects such as Omantel and new Agentic AI showcases at TM Forum illustrate both potential opportunities and execution and talent retention risks. Investors who are comfortable with that trade off may consider Cerillion for further research within AI focused software.

Cerillion’s record back order and AI linked billing stack hint at a story the market may not be fully pricing in yet. Get the full context on contracts, cash generation and execution risk in the analysis report for Cerillion

Bytes Technology Group (LSE:BYIT)

Overview: Bytes Technology Group is a UK based IT solutions provider that helps organisations buy and run software, security, AI and cloud services, with a key role in integrating AI and machine learning tools into everyday workflows through managed cloud deployments, software licensing and consulting. While it also resells hardware like servers and laptops, the clearest AI link is its work around cloud based AI platforms and training customers to use those tools effectively.

Operations: Bytes Technology Group generates about £220.6 million in revenue from its IT Solutions Provider segment, primarily by supplying and managing software, cloud and related services for customers.

Market Cap: £1.02b

Investors looking at AI adoption rather than chip manufacturing should pay close attention to how Bytes Technology Group plugs enterprises into cloud based AI platforms and then earns ongoing revenue from renewals, upselling and consulting. High returns on equity and strong profit margins suggest its mix of software and services can be very cash generative. However, the business still faces real pressure from lower margin public sector work and changes to Microsoft rebate structures. Execution on hiring, regional expansion and the new marketplace portal will be important tests of how well Bytes converts AI interest into sustained profits. For anyone researching AI and cloud integrators, this is a story where the details really matter.

Bytes Technology Group’s high margin software and services story can look straightforward, yet the real test is how those AI and cloud contracts convert into sustainable returns while rebate and public sector pressures bite. Get the full picture in the 3 key rewards and 1 important warning sign

AdvancedAdvT (AIM:ADVT)

Overview: AdvancedAdvT is a London based software company that focuses on healthcare compliance and automation, using AI based healthcare intelligence, accreditation tools and intelligent process automation to analyse clinical and operational data. Around this core, it also sells broader human capital management, ERP and workforce management SaaS, so the pure AI healthcare modules are a focused part of a wider software suite.

Operations: AdvancedAdvT generates all of its reported £53.4 million in revenue from Internet Software & Services, entirely in the United Kingdom.

Market Cap: £238 million

AdvancedAdvT may be of interest if you want exposure to AI being applied to real world healthcare workflows rather than high profile chatbots. Its AI based healthcare intelligence and compliance tools target a niche where hospitals and clinics face constant regulatory pressure, while the wider HCM and workforce SaaS platform gives it a broader customer footprint. Revenue of £53.4 million sits against a much smaller net income of £4.61 million, so recent margin compression and a £5.6 million one off loss are relevant for anyone assessing earnings quality. The stock trades on a premium P/E and is funded fully by external borrowing, so a central consideration for investors is whether the AI healthcare and automation offering can develop in a way that supports the current valuation and debt load.

AdvancedAdvT’s AI healthcare engine and premium P/E raise big questions about what the market is really pricing in. Get the full story in the full narrative for AdvancedAdvT

Seeking Fresh Alternatives Before Others Catch On

Markets can move quickly and emerging themes may not stay under the radar for long. Review these stock shortlists early, before momentum builds and potential information advantages diminish.

• Consider steadier compounding potential by reviewing companies in the 7 resilient stocks with low risk scores before funds rotate into defensives and potentially move these opportunities out of an attractive range.
• Explore early exposure to physical assets by checking the 34 elite gold producer stocks while gold producers may still be less widely followed and before momentum-focused traders increase their attention.
• Evaluate opportunities linked to electrification spending by assessing infrastructure players in the 38 power grid technology and infrastructure stocks before additional grid investment flows attract a broader set of investors.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com