Investors are always on the lookout for the next big opportunity in the stock market. While the top tech stocks continue to surge, some are turning their attention to smaller names in the small- and mid-cap category. Despite the volatility that often comes with these stocks, many believe that they hold high potential for significant gains.
With stock indexes hitting record highs and meme stocks keeping retail traders on their toes, it can be easy to get caught up in the excitement of the market. However, there are still opportunities to be found in lesser-known corners of the market. Some investors are looking towards smaller stocks that show promise for growth.
One area of interest is the small-cap Russell 2000, which may have struggled in 2025 but is seen as a potential opportunity for those willing to do their due diligence. Alexander Wah, founder and chief investment officer of Prince Capital, believes that smaller caps are historically undervalued and often overlooked by investors. He points to companies like Sterling Infrastructure, a provider of AI infrastructure solutions, as a prime example of a small-cap stock with potential in the AI boom.
Brandon Nelson, senior portfolio manager at Calamos Investments, also sees potential in small-cap stocks related to the AI trade. He highlights companies like Sterling, Lumentum Holdings, and Argan as examples of small-mid cap stocks that have shown strong growth and are performing well year-to-date.
In addition to the potential for growth in small-cap stocks, some investors believe that a policy shift could benefit these companies. Joe Alger, investment research analyst at Crestwood Advisors, suggests that small caps could benefit from a less regulatory environment towards mergers and acquisitions. With the expectation of a resurgence in M&A activity and more clarity on tariffs, small-cap stocks could see a boost in the near future.
Overall, while the allure of big tech stocks and record highs in the market may be captivating, there are still opportunities to be found in smaller stocks with high growth potential. By doing thorough research and staying informed on market trends, investors can uncover hidden gems in the small- and mid-cap category that have the potential to deliver significant returns.
