Artisan Partners, an investment management company, released its first-quarter 2026 investor letter for the “Artisan Small Cap Fund”. A copy of the letter is available to download here. US equities were mixed in Q1 2026, with major indices hitting all-time highs in January before retreating amid geopolitical tensions, changing monetary policy, and economic uncertainty. Energy stocks surged, outpacing the market, while value outperformed growth as investors moved from tech to commodity-sensitive sectors. Market leadership broadened, with mid- and small-cap indices performing better than large caps. The Iran conflict influenced market behavior. AI-related investments supported capital spending and earnings, though investor sentiment was mixed. The portfolio saw negative absolute returns but outpaced the Russell 2000® Growth Index, offering some downside protection. Investor Class: ARTSX, Advisor Class: APDSX, and Institutional Class: APHSX returned -2.72%, -2.68%, and -2.69%, respectively, in the first quarter compared to -2.81% return for the index. The market shifted towards cyclical, commodity sectors, less aligned with high-quality franchises, due to geopolitical events and energy shocks. Despite this, many portfolio companies maintained solid earnings aligned with their profit cycles. The Firm views this environment as supportive of its stock selection approach, focused on bottom-up stock selection across industries. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Artisan Small Cap Fund highlighted Onto Innovation Inc. (NYSE:ONTO). Onto Innovation Inc. (NYSE:ONTO) is a semiconductor equipment and software company that designs, developments, manufactures, and supports process control tools for macro-defect inspection and metrology. On June 4, 2026, Onto Innovation Inc. (NYSE:ONTO) closed at $274.76 per share. One-month return of Onto Innovation Inc. (NYSE:ONTO) was -3.48%, and its shares gained 185.91% over the past 52 weeks. Onto Innovation Inc. (NYSE:ONTO) has a market capitalization of $13.67 billion.
Artisan Small Cap Fund stated the following regarding Onto Innovation Inc. (NYSE:ONTO) in its Q1 2026 investor letter:
“During the quarter, we initiated new GardenSM positions in Onto Innovation Inc. (NYSE:ONTO), Baldwin Group and Freshpet. Onto is a leading provider of process control and inspection solutions used in advanced semiconductor wafer manufacturing. We reentered the position following a prior exit driven by concerns that KLA’s growing scale and focus in advanced multi-layer inspection could disrupt the competitive landscape. While KLA has continued to invest in inspection solutions benefiting from AI-driven demand, we have not seen a material deterioration in Onto’s competitive positioning. Meanwhile, our conviction has strengthened as Onto benefits from an early-stage recovery in its memory end market, driven by data center expansion and AI-related demand. We see this as the beginning of a potential memory supercycle, supporting accelerating growth, operating leverage and positive estimate revisions.”
Onto Innovation Inc. (NYSE:ONTO) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 67 hedge fund portfolios held Onto Innovation Inc. (NYSE:ONTO) at the end of the first quarter, up from 46 in the previous quarter. While we acknowledge the risk and potential of Onto Innovation Inc. (NYSE:ONTO) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Onto Innovation Inc. (NYSE:ONTO) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Onto Innovation Inc. (NYSE:ONTO) and shared the list of best strong buy tech stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.
Disclosure: None. This article is originally published at Insider Monkey.
