On February 9, Jay Woods of Freedom Capital Markets, Douglas Boneparth of Bone Fide Wealth, and Alex Kantrowitz of Big Technology appeared on CNBC to discuss rotation and tech volatility. Boneparth expanded on the theme of diversification and noted that while large-cap US stocks are the primary focus for many, mid-caps, small-caps, developed international markets, and emerging markets are all showing a strong start to the year. He pointed out that international markets are coming off an exceptional 2025, rewarding those with diversified portfolios.
Kantrowitz addressed the current volatility in tech and explained that while there is a firm belief that AI will succeed, the market is currently guessing who the ultimate winners will be: whether it is chip manufacturers, foundational model companies, or consultants. He suggested the market is in a period where it takes wild swings based on earnings as it attempts to predict outcomes two to three years into the future.
The software sector, particularly referencing the IGV (Software ETF), has hit six-year lows relative to the S&P 500. Woods described this as software sludge but viewed it as a sassy trading opportunity. Boneparth added that while buying dips in the S&P 500 is difficult, the software space currently offers meaningful discounts for long-term holders. He notes that if major private players like Anthropic or OpenAI were already public, the software ETFs would likely look much healthier.
That being said, we’re here with a list of the 11 best small cap tech stocks with high upside potential.
Our Methodology
We used screeners to identify small-cap tech stocks that are trading between $300 million and $2 billion and have an average upside potential of at least 50%. We limited our final selection to companies that have recently reported noteworthy developments likely to impact investor sentiment. These stocks are also popular among analysts and elite hedge funds.
Note: All data was sourced on February 25.
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).
11 Best Small Cap Tech Stocks With High Upside Potential
11. CEVA Inc. (NASDAQ:CEVA)
CEVA Inc. (NASDAQ:CEVA) is one of the best small cap tech stocks with high upside potential. On February 17, CEVA concluded 2025 with a record-breaking Q4, generating $31.3 million in revenue, which was a 7% increase year-over-year. This was driven by an 11% rise in licensing revenue and strong demand for connectivity, particularly in Wi-Fi, where shipments grew 31% over the previous year.
The company maintained exceptional profitability with non-GAAP gross margins reaching 89% and non-GAAP net income surging 86% to $4.9 million. These results reflect a successful push into the AI sector, with the company signing 18 licensing agreements in the quarter, including significant deals for its Neural Processing Unit technology
For 2026, CEVA Inc. (NASDAQ:CEVA) expects revenue growth between 8% and 12%, with non-GAAP operating income projected to climb as much as 40%. The CEO highlighted the company’s expanding NPU pipeline and noted recent design wins with top PC OEMs for AI-integrated chips as a major growth catalyst.
CEVA Inc. (NASDAQ:CEVA) provides silicon and software IP solutions to semiconductor and original equipment manufacturer companies in the US, Europe, the Middle East, the Asia Pacific, and internationally.
10. Netgear Inc. (NASDAQ:NTGR)
Netgear Inc. (NASDAQ:NTGR) is one of the best small cap tech stocks with high upside potential. On February 4, Netgear achieved a turnaround in 2025, marking its first year of revenue growth since 2020 with a $25 million annual increase. Strategically, Netgear strengthened its enterprise division by acquiring two software teams and expanding its partner ecosystem to 524 members. These moves are part of a broader shift to increase the enterprise portion of the business to 65%, supported by the acquisition of a perpetual license for its Pro AV operating system to drive long-term margin expansion.
Despite these successes, the company faces external pressures, most notably a global memory shortage driven by AI data center demand. This shortage is expected to escalate costs and potentially squeeze gross margins in H2 2026. On the consumer side, revenue declined by 7.3%, hampered by a steep drop in sales to service providers and a post-holiday demand softening that was more severe than typical seasonal trends.
Netgear Inc. (NASDAQ:NTGR) is focusing on its high-growth Pro AV managed switches, expecting to reach a stable inventory position by the end of Q1 to better match market demand. To mitigate rising component costs, the company plans to implement price increases in the enterprise sector and reduce promotions for consumer products.
Netgear Inc. (NASDAQ:NTGR) provides networking technologies for businesses, homes, and service providers in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company operates in two segments: Enterprise and Consumer.
