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 (PUBM +1.96%) is a digital advertising technology firm. Its software provides internet publishers with a means to monetize their work by using artificial intelligence (AI) and automation to sell advertising.  

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. 

PubMatic completed its initial public offering (IPO) at the end of 2020. The company's sales growth has slowed this year, and share prices have been volatile. Still, the stock looks attractively valued, given that its cloud platform processed 75 trillion ad impressions in the first quarter of 2025 for more than 1,950 publishers.

It's not just giant tech companies like Nvidia, Apple, and Microsoft that are looking at major profits from the AI boom. A number of smaller, more-focused companies could ride the wave to big profits, as well. ACM Research (ACMR +7.02%), a manufacturer of semiconductor cleaning equipment, may be a good small-cap bet for investors seeking opportunities from growth stocks.

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.

Although the $214.5 million in revenue for the second quarter of 2025 lagged analyst expectations, the company posted non-GAAP (adjusted) diluted earnings per share of $0.54 during the second quarter of 2025, beating the predicted $0.49 earnings. On a worrisome note, operating expenses rose 22% year over year while revenue increased by just 6.4% in the same period because of more spending on research and development (R&D), as well as sales and marketing.

The company's reliance on the Chinese market may worry some investors, but 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.

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