In this article, we will take a detailed look at the 10 Best Small-Cap Stocks With Huge Potential According to Reddit as Market Looks Beyond AI Trade.
Investors remain skeptical about the AI trade amid valuation and demand concerns after major tech stocks enjoyed strong gains over the past few months. Small-cap stocks are now gaining Wall Street’s attention as investors look for under-the-radar names to diversify their portfolios and pile into untapped opportunities.
Chris Retzler, Needham portfolio manager, said in a program last month that small-cap stocks offer an opportunity amid falling interest rates. He believes tariff-related concerns have so far put a lid on these stocks because of the limited capability of smaller companies to handle duties.
“We think that small caps are coming into a good time that you know we’ve been underperforming for the last couple,” Retzler said. “You know, revenue acceleration will certainly be a welcomed benefit here.”
‘Don’t Fight The Fed’
The analyst admitted that there have been several false starts for small-cap stocks in the past, but he believes interest rate declines would trigger a money flow into these stocks from money-market funds.
“I think some bottoms were really put in and buying began to come in, and you look at the old tale of don’t fight the Fed,” Retzler said. “We are in a cycle now of rate cutting, and there will be a point at which money market rates are going to drop low enough that money is going to have to flow into the equity markets, and we think that it’s going to find a home in small caps.”
The analyst believes a lot of the market’s outperformance in the future would come from small-cap stocks, where liquidity is tighter.
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Photo by Chris Liverani on Unsplash
For this article, we scoured through several investing communities on Reddit and picked the 10 most popular small-cap stocks Redditors are piling into these days. Redditors believe these stocks have plenty of upside potential due to their core business growth catalysts. With each stock, we have mentioned its hedge fund sentiment. 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. HydroGraph Clean Power Inc (OTCMKTS:HGRAF)
Number of Hedge Fund Investors: N/A
HydroGraph Clean Power Inc (OTCMKTS:HGRAF) is a Canadian materials and technology company producing graphene and clean hydrogen using its own patented process. Redditors like the stock because of the potential applications of graphene, which is lighter but extremely stronger when compared with steel. Its applications include batteries, composites, coatings, medical devices, and hydrogen fuel applications, among others.
The company is still in its early stages and could only be considered suitable for long-term investors. What makes the company stand out among competitors? It focuses on a superior production process, and could have a first-mover advantage in the US market. Unlike other companies which focus on mined graphite, it uses acetylene as its main feedstock. This helps avoid impurities found in graphite and allows the company to produce a high-purity product domestically, reducing reliance on China-controlled graphite supply chains.
9. High Tide Inc (NASDAQ:HITI)
Number of Hedge Fund Investors: 3
High Tide Inc (NASDAQ:HITI) is a Canadian company engaged in the cannabis retail business in Canada. Over the past year, the stock is down 13%.
A Redditor, while making the case of the company, said that it can develop a “Costco-like” business model in the future based on memberships. Redditors are also hopeful that the stock will benefit amid easing restrictions on Cannabis in North America. In September, the company posted quarterly revenue of about $149.7 million, beating the Street’s view of $106.5 million.
8. Iradimed Corp (NASDAQ:IRMD)
Number of Hedge Fund Investors: 13
Iradimed makes magnetic resonance imaging (MRI) compatible medical devices. The company recently reported strong quarterly results, posting year-over-year revenue growth of about 15%. Redditors like the stock because they believe it is among the few companies making MRI-compatible devices in the US. The stock is up 64% year to date.
The company’s MRI-compatible IV infusion pumps and patient vital signs monitoring systems are seeing double-digit revenue growth. Analysts have high expectations for the commercial launch of the new 3870 MRI IV pump, which would have a relatively higher price target. The company recently raised its full-year outlook, and management highlighted strong demand and stable pricing trends.
Conestoga Capital Advisors Micro Cap Strategy stated the following regarding IRadimed Corporation (NASDAQ:IRMD) in its fourth quarter 2023 investor letter:
“IRadimed Corporation (NASDAQ:IRMD): IRMD is a commercial stage medical technology company focused on innovating MRI patient care. The company’s three main products include an MRI compatible patient monitor, an MRI compatible IV infusion pump, and a smart ferrous metal detector. The company has three revenue line items, including devices, disposables, and services. We believe a recent competitive landscape change favoring IRMD will fuel a new leg of durable growth and impressive profitability. Primary competitor Invivo, owned by Philips is pulling back from the market, and we expect IRMD to be the primary beneficiary.”
7. Gambling.com Group Ltd (NASDAQ:GAMB)
Number of Hedge Fund Investors: 23
Sports betting and performance marketing company Gambling.com is one of the most popular small-cap stocks on Reddit. However, many investors warned about the stock’s valuation and its volatile business model. The stock is down 66% so far this year. The company monetizes online gambling traffic and provides sports betting data and analytics.
Redditors like the stock because about half of its revenue is recurring, which includes marketing revenue shares and subscription-based sports data services. The company is diversifying its portfolio by forays into sports data and ticketing.
Earlier this month, the company posted its latest quarterly results. Earnings came in ahead of Wall Street estimates, but revenue fell short despite 21% annual growth.
6. Dlocal Ltd (NASDAQ:DLO)
Number of Hedge Fund Investors: 24
Dlocal Ltd (NASDAQ:DLO) is a Uruguayan financial technology company providing cross-border payment services. Redditors are fond of the company’s management, double-digit revenue growth and increasing total addressable market.
“If they can increase their profit margins by cross-selling other services like risk management that might lead to a valuation multiple increase,” a Redditor commented about the stock a couple of months ago.
Dlocal Ltd (NASDAQ:DLO) is up 10% so far this year.
Polen Global SMID Company Growth Strategy stated the following regarding DLocal Limited (NASDAQ:DLO) in its Q2 2024 investor letter:
“DLocal Limited (NASDAQ:DLO), a payments processing company headquartered in Uruguay saw further weakness after reporting disappointing first quarter results. While payment volumes and revenues grew 49% and 34%, respectively, in 1Q 2024, gross profit only grew 2% due to elevated processing costs. The company has also invested more in building out its scale and functionality, which further weighed on profitability. Longer term, as one of the leading emerging markets payments processing companies, we believe dLocal can continue to see attractive growth and improve profitability under a highly-regarded management team.”
5. Coursera Inc (NYSE:COUR)
Number of Hedge Fund Investors: 30
Online course provider Coursera Inc (NYSE:COUR) is one of the best small-cap stocks with upside potential, according to Reddit. Investors believe Coursera Inc (NYSE:COUR) could see an increase in engagement and usage of its platform amid labor market worries and AI-related risks to jobs, as millions of Americans are likely to upskill themselves. The company’s management talked about AI and its impact on Coursera Inc (NYSE:COUR) in an earnings call last month:
“In 2025, AI skills are becoming essential, and demand has accelerated. We are now seeing 14 enrollments per minute in our catalog of more than 1,000 generative AI courses, up from 8 enrollments per minute last year. Generative AI is the most in-demand skill in Coursera Inc (NYSE:COUR) history, which is why I was thrilled to recently announce our content partnership with Anthropic, welcoming one of the world’s leading AI research companies to our platform. As the need to develop new skills progresses at an unprecedented rate, Anthropic, like many of our partners, shares our commitment to helping learners and institutions everywhere apply the latest advancements in AI safely and effectively, unlocking new ways to learn, teach and work. Let’s turn to our recent product updates.”
Read the full earnings call here.
4. EZCORP Inc (NASDAQ:EZPW)
Number of Hedge Fund Investors: 32
EZCORP Inc (NASDAQ:EZPW) is a Texas-based pawn shop operator. Redditors like the stock due to the business’s appeal amid rising inflation and difficulties in security credit in the US. The stock is up 48% so far this year.
The company recently posted better-than-expected quarterly results. Pawn revenue in the US saw double-digit growth. It has grown its footprint across over 1,300 locations across five countries. The company also highlighted digital initiatives, omnichannel expansion, and inventory efficiency improvements that are likely to drive future growth.
Wasatch Micro-Cap Fund stated the following regarding EZCORP, Inc. (NASDAQ:EZPW) in its Q1 2025 investor letter:
“Another contributor to performance was EZCORP, Inc. (NASDAQ:EZPW), a provider of pawn services and loans in the U.S. and Latin America. As a defensive stock, EZCORP was one that investors gravitated toward given its counter cyclical demand. As discretionary income shrinks, EZCORP can be source of consumer credit. Additionally, the company recently announced the issuance of convertible senior notes in order to more favorably restructure its balance sheet.”
3. Enova International Inc (NYSE:ENVA)
Number of Hedge Fund Investors: 34
Enova International Inc (NYSE:ENVA) is a financial services company providing installment loans and lines of credit accounts. The stock is up 31% so far this year. The company is positioned to benefit from the ongoing rate cut cycle of the Federal Reserve and small businesses’ preference for non-banking lenders. In the third quarter, the company posted revenue growth of 16%, while small business lending increased 29% on an annual basis.
“Loans at a decent price, has pretty crazy growth lately and with lower rates coming may potentially increase business,” a Redditor said while pitching this small-cap stock.
2. Halozyme Therapeutics, Inc. (NASDAQ:HALO)
Number of Hedge Fund Investors: 40
Halozyme Therapeutics, Inc. (NASDAQ:HALO) is one of the best small-cap stocks with huge upside potential according to Redditors. The company is working on oncology therapies designed to target the tumor microenvironment. The company recently announced to acquire Elektrofi, which can expand its drug delivery capabilities into high-concentration biologic formulations. The stock has gained about 54% so far this year.
The FDA recently approved Darzalex Faspro, an injectable version of the multiple myeloma therapy daratumumab, developed by J&J and Halozyme Therapeutics (HALO). The product was approved as a front-line option for light chain (AL) amyloidosis, a rare blood cell disorder.
Earlier in November, the company posted strong quarterly results, indicating revenue growth of 22% year over year, while royalty revenue increased 52%.
Artisan Small Cap Fund stated the following regarding Halozyme Therapeutics, Inc. (NASDAQ:HALO) in its second quarter 2025 investor letter:
“Among the detractors in Q2 were Halozyme Therapeutics, Inc. (NASDAQ:HALO), Clearwater Analytics and Lattice Semiconductor. Halozyme provides a unique technology platform (ENHANZE®) that converts biologics and small molecule drugs administered intravenously into a subcutaneous formulation. The company reported strong earnings and raised its full-year guidance in May, but shares were negatively impacted by uncertainty surrounding new draft guidance from the Centers for Medicare and Medicaid Services (CMS) on drug pricing and potential delays in launching new products. We trimmed our position as we await final guidance from CMS.”
1. Aurora Innovation Inc (NASDAQ:AUR)
Number of Hedge Fund Investors: 41
Pennsylvania-based self-driving technology company Aurora Innovation Inc (NASDAQ:AUR) is one of the best small-cap stocks to buy, according to Redditors. The company sells self-driving hardware, software, and data services for different vehicle types. The company’s management said in a recent earnings call that its platform crossed 100,000 driverless miles on public roads and maintained a “perfect driverless safety record.”
“Looking ahead to 2026, we expect to rapidly unlock lanes across the Sun Belt. Future planned expansions include lanes between Dallas and Laredo, a critical route for one of our key customers and between Dallas and Atlanta, which will extend the driverless I-10, I-20 corridor to approximately 2,000 miles. Launching driverless operations from Fort Worth to El Paso and soon in the Phoenix extension required us to validate behavior against dust storms, which are prevalent in some parts of Texas and Arizona,” the company’s CEO Christopher Urmson said during the call.
Read the full earnings call transcript.
Aurora has five driverless trucks that are now regularly delivering customer freight, and the company is also planning to deploy a fully driverless truck without an observer next year.
The stock is down 36% so far this year.
While we acknowledge the potential of AUR to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AUR and that has 100x upside potential, check out our report about this cheapest AI stock.
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