The Motley Fool spotlights three ‘incredible growth’ small caps to buy on the dip

Motley Fool contributor George Budwell has highlighted three small- and mid-cap growth stocks that investors should consider buying during the current market downturn. They have fallen significantly since the beginning of the year and the April selloff. However, Budwell sees “tremendous upside potential” in these three “game-changing innovators.”

Shares of quantum computing pioneer D-Wave have dropped nearly 26% year to date to $6.25 per share, creating an attractive entry point for investors with patience, according to Budwell.

D-Wave is one of the few players in the industry that already has operational quantum computers with commercial deployments across various sectors. The company is a trailblazer in quantum annealing systems, which solve complex optimization problems that are “practically impossible” for traditional computers to handle. This gives D-Wave a “strategic foothold” in a market that Boston Consulting Group estimates could reach $850 billion by 2040. Still, Budwell advises investors to make D-Wave only a small position in their portfolios for now.

Shares of BigBear.ai, a company that sells AI-powered analytics to support governments and businesses, have plunged more than 42% year to date to $2.57 per share. Among its clients are defense and intelligence agencies, which, according to Budwell, provide both revenue visibility and “powerful validation” of its technology. BigBear.ai’s focus on mission-critical AI applications creates “inherently sticky” relationships with clients in areas with high barriers to entry. However, Budwell notes that investors should factor in the volatility of government contracting cycles and competition from other AI providers when deciding how much of the stock to hold.

Rocket Lab, a mid-cap rival to Elon Musk’s SpaceX, has seen its stock fall nearly 25% since the beginning of the year and now trades at $19 per share. Budwell views this as an exceptional entry point for investors looking to take part in the “commercial space revolution.” Rocket Lab belongs to a very small group of companies that have already demonstrated orbital launch capabilities. “It represents that rare combination of proven technology, established revenue streams, and tremendous runway for growth as the space economy expands,” Budwell argues.