Here’s Why TimesSquare Capital U.S. Small Cap Growth Strategy Sold Its Position in FormFactor (FORM)

TimesSquare Capital Management, an equity investment management company, released its “U.S. Small Cap Growth Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the quarter, the fund returned -9.41% (gross) and -9.64% (net), compared to a -11.12% return for the Russell 2000 Growth Index. There was a broad positive sentiment in the market at the beginning of 2025. Expectations for a pro-business and soft regulatory environment lifted global markets in January. However, delays and uncertainties surrounding U.S. policies led to a significant downturn in March. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, TimesSquare Capital U.S. Small Cap Growth Strategy highlighted stocks such as FormFactor, Inc. (NASDAQ:FORM). FormFactor, Inc. (NASDAQ:FORM) manufactures and sells probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to semiconductor companies. The one-month return of FormFactor, Inc. (NASDAQ:FORM) was 3.66%, and its shares lost 44.48% of their value over the last 52 weeks. On June 23, 2025, FormFactor, Inc. (NASDAQ:FORM) stock closed at $33.12 per share, with a market capitalization of $2.553 billion.

TimesSquare Capital U.S. Small Cap Growth Strategy stated the following regarding FormFactor, Inc. (NASDAQ:FORM) in its Q1 2025 investor letter:

Among the wide variety of Information Technology companies, we prefer critical system providers, specialized component designers, systems that improve productivity or efficiency for their clients, and others that are growing their shares of corporate IT budgets. FormFactor, Inc. (NASDAQ:FORM) provides test and measurement solutions to the semiconductor industry. We exited the position due to incremental restrictions on its business with China as well as general weakness in semiconductor volumes. The stock was down -27% for the time it was held in the quarter.

FormFactor, Inc. (NASDAQ:FORM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held FormFactor, Inc. (NASDAQ:FORM) at the end of the first quarter, which was 26 in the previous quarter. In the first quarter FormFactor, Inc. (NASDAQ:FORM) reported revenue of $171.4 million, which was $1.4 million above the midpoint of guidance range. While we acknowledge the potential of FormFactor, Inc. (NASDAQ:FORM) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered FormFactor, Inc. (NASDAQ:FORM) and shared the list of best quantum computing stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of FORM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.