Best Small-Cap Tech Stocks

Small-cap tech stocks, usually defined as technology companies with market capitalizations of no more than $2 billion, can be risky investments. Many of these small companies are pioneering new technologies. But their share prices can be highly volatile, and they risk being outcompeted by larger businesses with stronger balance sheets.

Some of these emerging technology businesses may be future leaders in their industries and are worth adding to your portfolio today. Investing in a basket of small-cap stocks -- say five to 10 -- is less risky than concentrating your holdings in a single company or two.

PubMatic's publisher clients include a diverse group of businesses, including news organizations, e-commerce companies, video game makers, and streaming TV services. The company derives about half of its revenue from internet content formatted for mobile devices.

Mobile represents a growing opportunity for PubMatic, especially outside the U.S., where PubMatic is just beginning to add customers. Digital marketing is another secular growth trend that benefits the company.

Although much of the company's demand comes from Chinese chip foundries -- a lucrative but potentially unstable market, given current trade tensions between the U.S. and China -- its equipment generally isn't used for advanced chips that are subject to sanctions.

The company reported a 32% year-over-year increase in revenue during the third quarter. But it fell far short of analyst expectations with a non-GAAP (non-generally accepted accounting principles) diluted EPS of $0.36, only a little more than half of the $0.55 projected by analysts.

On a worrisome note, operating expenses continued to climb, rising almost 40% year over year due to higher spending on research and development (R&D), sales and marketing, inventory buildup, and materials and labor.

The company's reliance on the Chinese market may also worry some investors. However, it still stands to benefit from the CHIPS Act of 2022, which provides $52 billion in manufacturing grants and research investments to boost the domestic semiconductor market.

4. Inseego

Inseego designs and sells wireless network hardware and provides software for companies to deploy and remotely manage devices connected to their networks. As next-gen 5G technology networks are being built, demand for Inseego's antennae and other infrastructure gear is accelerating.