There could be a 'renaissance' in small tech stocks: Hot take from Opening Bid
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There are more growth companies in tech outside the much-hyped “Magnificent 7.”
And with the Mag 7 still underperforming, now may be a good time to begin kicking the tires on some overlooked smaller-cap names in the tech pool.
“I would say that we’ve gotten addicted over these last few years to the Mag 7. They’re great companies, and there’s a reason why they’re so large and cash-generating and so forth. But I don’t think they deserve probably as much a percentage of your own portfolio as you would’ve thought like a year ago, two years ago, when they were shooting the lights out in ’23 and ’24,” EMJ Capital founder Eric Jackson told me during the Hot Takes segment in Yahoo Finance’s Opening Bid podcast (video above; listen in to full episode below).
Jackson has been a tech investor going on 20 years. He specializes in tech opportunities for clients in the small- to medium-cap space but is also an avid student of megacap names such as Nvidia (NVDA).
“I think a lot of investors should take a step back and try to discover the smaller names within tech. Tech is going to continue to be the place where people are because of growth expectations,” Jackson added. “I think there’s going to be a renaissance of these smaller-growth names in the years ahead.”
A couple of stocks Jackson likes that fit the bill: digital insurance play Root (ROOT) (with a market cap of $2.3 billion) and quantum computing companies IonQ (IONQ) and D-Wave Quantum (QBTS). IonQ and D-Wave sport market caps of $5.6 billion and $2.9 billion, respectively. Root has surged 117% this year while D-Wave has gained 18%. IonQ stock is off by 43%.
Exploring the broader tech complex wouldn’t hurt right now as the Mag 7 continues to lag on growth and valuation concerns.
Apple’s stock (AAPL) is down 14% year to date, Microsoft (MSFT) 8%, Nvidia 13%, Amazon (AMZN) 11%, Google (GOOG) 14%, and Tesla (TSLA) a stunning 43%. Meta (META) has outperformed the group with a modest drop, in part as co-founder Mark Zuckerberg has cozied up to the Trump administration.
“The transition of many of these companies from asset-light to asset-heavy businesses can complicate the earnings growth outlook. Furthermore, the rollout of China’s privately owned DeepSeek platform also raised questions over the sustainability of the ‘American exceptionalism’ theme that the Mag 7 has helped build,” said LPL Financial chief technical strategist Adam Turnquist.
Three times each week, I field insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.
Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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