It has been an exciting few days for Raspberry Pi (LSE:RPI) investors. After going public in 2023, the much-hyped growth stock hasn’t quite lived up to some people’s expectations, falling 43% in the last year. However, the share price has rocketed in February, based on chatter around the potential AI use cases for company products. Is this just hype, or is there a bigger play here?

Increased chatter

A key driver of the recent surge has been growing excitement that devices made by Raspberry Pi could become useful hardware for running lightweight AI models locally, rather than relying on cloud servers.

Enthusiasm has spread among developers after demonstrations showed that certain open-source AI agents and small language models can run on the company’s low-cost, single-board computers. This created the perception that Raspberry Pi could play a larger role in the AI build-out than previously thought.

Further to this, confirmation came through that CEO Eben Upton bought ‌stock in the company. It only amounted to £13,224, but was another sign that the management team believe in the future of the business, along with the potential indication that the stock’s undervalued (hence why the CEO’s buying).

Tempering excitement

The move has certainly put the stock back on investors’ radar, but I feel we need to take a breath. On the hardware side, it’s important to note that we haven’t yet seen any concrete evidence of a large commercial demand shift. Sure, the products are cheaper than competitors’, but price isn’t the only factor in the decision-making process for large buyers.

The CEO’s purchase is small relative to the business’s market-cap (£800m). I don’t really see this as a huge pledge of support from the CEO. If it were 10 times the size, it’s a different story!

Interestingly, the business commented on the share price surge saying: “There’s nothing from ​the company side beyond what’s already ​in the public domain”. To me, this highlights that the move’s based on speculation, rather than anything concrete.

The AI race

I don’t see the company as the next Nvidia. I do get the argument that if running AI locally on low-powered devices takes off, we could see a surge in demand at Raspberry Pi, as we did with GPUs for Nvidia. However, Raspberry Pi doesn’t have the same level of hardware, software power or scale as Nvidia has (or had a few years back).

In terms of share price performance, I think Raspberry Pi can continue to do well this year. However, investors will want to start to see financial performance improve, to show that speculation around demand is filtering through to revenue. I’m not going to rule out strong stock gains in a similar way we saw with Nvidia in the past, but we’ll certainly need some evidence to convince more people to invest.

On that basis, I’m putting the stock on my watchlist, but will be holding off investing right now.