In this article, we will look at the 10 Best Small-Cap Stocks Ready to Explode in 2026.
On January 27, Matt Stucky from Northwestern Mutual appeared on a CNBC Television interview to discuss the performance of small-cap stocks. The Russell 2000 has outperformed the S&P 500 over the past six months, with returns of 18.31% compared to 9.53%. The outperformance is primarily driven by lower valuations of small caps and expectations of rate cuts. Stucky believes that this outperformance trend is expected to continue. He noted that this performance was long overdue, mainly because of the narrowness of the market around the big tech names.
He noted that over the past few years, higher interest rates have benefited larger companies with AI and tech taking the lead. However, now the situation is changing with easing monetary policies and investors looking to diversify their portfolios. Stucky highlighted that as the Federal Reserve continues to ease rates and small-cap stocks post upward earnings revisions, he sees significant room for small-cap stocks to run.
With that, let’s take a look at the 10 Best Small-Cap Stocks Ready to Explode in 2026.
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Our Methodology
To curate the list of 10 Best Small Cap Stocks Ready to Explode in 2026, we used the Finviz Stock Screener, CNN, WSJ, and Insider Monkey’s Q3 2025 database. Using the screener, we aggregated a list of small-cap stocks (market cap between $300 million and $2 billion), for which analysts expect more than 50% upside. Next, we cross-checked the market cap from WSJ and the upside potential from CNN and ranked the stock in ascending order of the number of hedge fund holders. Please note that the data was recorded on January 27, 2026.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10 Best Small Cap Stocks Ready to Explode in 2026
10. SharpLink Gaming, Inc. (NASDAQ:SBET)
Market Cap: $1.96 billion
Upside: 100.00%
Number of Hedge Fund Holders: 21
SharpLink Gaming, Inc. (NASDAQ:SBET) is one of the Best Small Cap Stocks Ready to Explode in 2026. On January 12, Gautam Chhugani from Bernstein reiterated a Buy rating on the stock with a $24 price target. Earlier on January 7, Brian Kinstlinger from Alliance Global also reiterated a Buy rating on SharpLink Gaming, Inc. (NASDAQ:SBET) but lowered the price target from $48 to $20.
Analysts at Alliance Global noted that the company now holds 864,402 Ethereum, which are worth roughly $2.9 billion. The firm noted that the price of Ethereum has gone down by around 30% since the firm’s last update on the stock, and they have reduced the price target.
That said, earlier on January 5, Cantor Fitzgerald analyst Brett Knoblauch initiated SharpLink Gaming, Inc. (NASDAQ:SBET) with a Buy rating and a $15 price target. The analyst noted that the company has experienced management with significant expertise in crypto and the Ethereum ecosystem. The analyst believes that this expertise will allow the company to execute successful Ethereum deployment strategies, which will eventually grow ETH at a faster rate.
SharpLink Gaming, Inc. (NASDAQ:SBET) is an online performance-based marketing company that serves the US sports betting and global iGaming industries by driving qualified traffic, player acquisitions, retention, and conversions through its PAS.net affiliate network.
9. Innodata Inc. (NASDAQ:INOD)
Market Cap: $1.87 billion
Upside: 55.41%
Number of Hedge Fund Holders: 21
Innodata Inc. (NASDAQ:INOD) is one of the Best Small Cap Stocks Ready to Explode in 2026. On January 20, Innodata Inc. (NASDAQ:INOD) announced receiving a contract for the US Missile Defense Agency’s Scalable Homeland Innovative Enterprise Layered Defense (SHIELD) indefinite-delivery/indefinite-quantity (IDIQ) contract. Management noted that this contract enables the company to bid on future task orders related to research, development, prototyping, engineering, and more.
That said, on January 5, BWS Financial reiterated a Buy rating on the stock with a $110 price target. BWS named Innodata Inc. (NASDAQ:INOD) as one of its top picks for 2026, driven by catalysts driving revenue growth throughout the year. The firm highlighted that the company entered the fiscal Q4 2025 with a government contract. This contract is expected to boost revenue for the company by year-end 2026. The analysts from BWS noted that as the AI landscape continues to grow, the use cases for data sets are only expected to advance further.
Innodata Inc. (NASDAQ:INOD) is a New Jersey–based data engineering and AI services company that builds and operates AI and data solutions for leading global technology companies and large enterprises.
