Tech Trailblazers: 7 Small-Cap Stocks on the Verge of a Breakthrough
Small-cap tech stocks are one of the best ways for long-term “buy-and-hold” investors to create lasting wealth. Think about it – today’s Magnificent Seven were once small-cap tech stocks in their own right, but today prop up the entire market. For an easy example, look to Nvidia (NASDAQ:NVDA): in 2010, the company was firmly in small-cap tech stock territory with a market cap hovering around $10 billion.
Today, of course, Nvidia is easily the stock market’s growth story of the decade with a $1 trillion market cap – if only you’d have invested when it was still a small-cap tech stock!mBut it isn’t too late for these seven small-cap tech stocks, each of which offers Nvidia-sized opportunities across sectors including space, healthcare, AI, semiconductors, and more.
Iridium Communications (IRDM)
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Iridium Communications (NASDAQ:IRDM) is one of Cathie Wood’s favorite stocks, but this small-cap tech stock is off to a rough start in 2024. The sat-phone stock is down nearly 30% since January 1st, but planned standard cell integrations could flip the script for IRDM.
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The company’s recent downturn mainly comes from a decision to end its joint venture with Qualcomm (NASDAQ:QCOM) in November. Their plan was to use Qualcomm’s semiconductor business to develop chips for connecting standard cell phones to Iridium’s satellite array.
Iridium became increasingly sidelined in the space-based telecom market following the partnership’s end, especially as competitors race to bring global connectivity to standard cell phones and push IRDM’s comparatively complex tech to the side.
Despite this, Iridium is ramping up its efforts to merge its satellite constellations with consumer smartphones. Iridium is tailoring its satellite protocols to fit existing devices instead of altering cell phones to match its satellite capabilities. This move aims to broaden IRDM’s total addressable market, opening up more growth opportunities for the stock and helping it catch up to competitors.
UiPath (PATH)
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Speaking of Cathie Wood, small-cap tech stock UiPath (NYSE:PATH) remains near the top of her favorite AI stocks list. Despite its lack of excitement, UiPath garners Cathie Wood’s investment based on its ability to leverage existing data that companies compile but often fail to utilize effectively.
During an interview, she highlighted UiPath’s role in a software-centric AI investment strategy, noting, “For every dollar of [AI] hardware, we expect 8 to 20 times the amount of software.”
She further highlighted how important data aggregation and management will be in the future, singling out UiPath for its global proprietary data and evolving solutions to automate routine tasks.
UiPath is slowly expanding its reach toward greater AI integration, and thus far, the move has benefited this small-cap tech stock. Shares are up over 60% over the past year, with few indications that momentum will slow anytime soon.
Rocket Lab (RKLB)
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Rocket Lab USA (NASDAQ:RKLB) shares took a hit thus far in 2024, dropping by 14% after a convertible note offering raised concerns about dilution among investors.
However, this downturn is likely temporary, offering a cheap entry point for the small-cap tech stock. The company’s recently awarded $515 million contract for launching and servicing certain space assets has only just begun to draw wider institutional interest, though RKLB has been on retail radars for quite some time.
For example, Citi analysts are optimistic about RocketLab, assigning a Buy rating to the stock with a $6.00 price target. The target is roughly 30% above the current share price, based on a 3x multiple of projected sales.
Citi believes that the solid government contract marks the start of an expanding sales cycle as RocketLab matures and becomes more competitive with other space stocks fighting for a piece of a growing $1 trillion industry.
AST SpaceMobile (ASTS)
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AST SpaceMobile (NASDAQ:ASTS) continues its winning streak after announcing a new, confidential contract agreement with the U.S. government. But the lack of details doesn’t detract from the core message.
Receiving U.S. government support signifies a strong endorsement of ASTS’s viability and offerings, a notable achievement given that ASTS is still in the pre-revenue phase, with its first major commercial launches scheduled for later this year.
This announcement follows closely on the heels of a significant strategic funding round for ASTS, featuring prominent investors such as AT&T (NYSE:T) and Google (NASDAQ:GOOG, NASDAQ:GOOGL). An ill-timed dilutive share offering announcement, which nearly pushed the company’s shares into penny stock territory, quickly overshadowed this funding news.
Shares rebounded after trading flat for about a month, though, and popped nearly 10% to start the week. Despite various challenges, positive momentum surrounding this small-cap tech stock suggests that ASTS is poised for significant achievements in 2024.
Aehr Test Systems (AEHR)
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Aehr Test Systems (NASDAQ:AEHR) distinguishes itself among small-cap tech stocks as a company poised to capitalize on the continuing semiconductor industry boom, albeit with a unique approach.
Its operational model sets it apart from new entrants and established giants alike because AEHR specializes in developing and supplying test systems that ensure the reliability and quality of semiconductors.
The demand for advanced testing systems is expected to surge as semiconductors become smaller, more complex, and more expensive. This expected demand places Aehr in a prime position for significant growth as a small-cap tech company.
In January, the company announced a remarkable financial performance, with revenue increasing by 45% year over year and GAAP net income rising by 63%. CEO Gayn Erickson has pointed out potential obstacles, such as a deceleration in the growth rate of the electric vehicle market, which could affect the timing of orders from both current and new customers.
However, AEHR’s proficiency isn’t limited to the EV sector; it also covers chips used in 5G technology, AI, machine learning, and beyond. Despite challenges in the EV market, AEHR is poised for an unprecedented year in 2024 and beyond, thanks to its broad (yet niche) expertise.
SoFi Technologies (SOFI)
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SoFi Technologies (NASDAQ:SOFI) appears to have carved out its niche, straddling the line between cutting-edge fintech and traditional banking.
As of the end of January, the company reported its first-ever profitable quarter, albeit with modest earnings of two cents per share. This achievement, especially in a persistent “higher for longer” economic environment, suggests the stock is poised for growth as interest rates stabilize.
SoFi is broadening its product lineup to solidify its position as a comprehensive financial services provider, building on its existing banking and lending services. The company has expanded its investment platform to include alternative investments, allowing investors to tap into exclusive assets such as private credit and venture capital via managed funds.
Despite these positive strides, not everyone is optimistic about SoFi’s prospects. Morgan Stanley recently downgraded the stock, arguing that it reflects excessive optimism about reaching 2026 profitability goals, especially considering a potentially weaker revenue growth forecast for 2024.
However, many factors still support a positive outlook for SoFi, and with the stock currently trading well below its previous highs, it remains a hot small-cap tech stock.
Clearpoint Neuro (CLPT)
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ClearPoint Neuro (NASDAQ:CLPT) is making a comeback to its previous price levels after experiencing a challenging period that led to a 10% loss over the past full year.
Despite these difficulties, ClearPoint remains a top pick among small-cap healthcare tech stocks.
The company’s flagship ClearPoint platform is revolutionizing brain surgery by enhancing the precision of procedures for diagnosing and treating neurological conditions. The recent increase in share price is largely due to a flurry of accelerated regulatory approvals, which have placed ClearPoint at the forefront of medical device innovation.
A key approval from the FDA has authorized the clinical use of ClearPoint’s SmartFrame OR Stereotactic System. This system changes the way providers administer radiation therapy during stereotactic radiosurgery, providing a non-invasive option for targeting and reducing tumors by focusing radiation on cancerous tissues.
Additionally, ClearPoint has received approval from European Union regulators to distribute its products throughout Europe, expanding its international presence and market potential.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.
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