While tech steals the spotlight, small cap industrials outperforming in 2025

While tech giants remain at the center of market attention, another trend – the rapid rise of small-capitalization industrial stocks – has largely gone unnoticed. Take the Equal Weight Industrial Small Caps Index, compiled for Oninvest by analyst Aldiyar Anuarbekov: it has gained 19.6% year to date.

The rise is remarkably balanced: exactly half of the 162 companies in the index delivered positive returns, and 12 doubled their market capitalization. As a result, industrial small caps have outperformed not only a broad small-cap benchmark, the iShares Russell 2000 ETF (IWM), which is up about 11% year to date, but also the S&P 500, which has added roughly 17%.

The strongest results came from the electrical equipment and components group, up 96.8%, and engineering and construction, which gained 82.3%. The waste management, pollution control, and cleaning systems industry also delivered solid gains: every company in this segment included in the index ended the period in positive territory. The performance was supported by continued investment in infrastructure, electrification, and environmental technologies.

By contrast, traditional interest-rate-sensitive areas lagged: trucking, rail transportation, and HR services declined 34%, 30%, and 22%, respectively. Demand for staffing services fell amid weak activity in their core client base – manufacturing, transportation, and warehousing.

Overall, the sector was driven by companies that successfully integrated into the new industrial paradigm of digitalization, automation, and green projects, while classic cyclical segments remain in recovery mode. A deeper look at the data shows that the rally is rooted in improving fundamentals in the businesses.

Anuarbekov picked three small-cap names that investors should take a look at.

California-based Amprius Technologies, a developer of advanced lithium-ion batteries, has been one of 2025’s biggest sensations. Since January, its shares have soared 362%, making Amprius the growth leader among industrial small caps. Investor interest spiked after the company secured a $10.5 million contract with the U.S. Defense Innovation Unit, the Pentagon’s innovation arm, also known as Unit X. The deal underscored the potential of Amprius’ drone and aerospace technologies.

The company’s second-quarter financial results (published in August) already reflected accelerated growth: revenue rose from $3.4 million last year to $15.1 million. Analysts at Roth Capital Partners expect full-year revenue to increase about 160%, from $24.2 million in 2024 to $64.0 million expected in 2025. Amprius achieved a positive gross margin for the first time in the quarter, which seems to confirm its move toward profitability. Analysts also note a series of large follow-on orders for the company’s ultra-dense SiCore batteries used in drones, including a $35 million repeat contract from a drone manufacturer in September. The consensus rating on the stock is “buy,” and the average target price of $17.20 per share implies upside of about a third versus the November 11 closing price.

Canada-based Ballard Power Systems, which designs and manufactures hydrogen fuel cells, has also shown impressive gains, with its shares climbing 108% year to date. For the second quarter, Ballard reported $550 million in cash and no debt, which gives it ample flexibility to invest even in challenging market conditions. Revenue grew 11% year over year to $17.8 million, and the management continues to streamline operations with the goal of reaching positive free cash flow by 2027-28.

Ballard’s hydrogen technology is now being tested in a new arena: data-center backup systems for AI workloads. The company has partnered with Microsoft and Caterpillar to supply 1.5 MW hydrogen fuel-cell systems under the U.S. Department of Energy’s H₂@Scale initiative. Industry risks remain elevated: the hydrogen-energy market is still at an early stage, and numerous projects have been delayed or canceled. Nevertheless, experts note renewed interest driven by government incentives in the U.S. and by AI-related power demand. According to MarketWatch data, the consensus rating for Ballard shares is “hold.”

Resolute Holdings Management, which provides management, operational, and consulting services to industrial clients, has traded on the Nasdaq only since February, when it was spun off from CompoSecure, Inc. Its shares have surged 303% in that period. On November 3, the stock jumped 97% to nearly $145 per share after the company released its third-quarter earnings. Fee income for the period totaled $3.7 million, and fee-related earnings (derived solely from recurring fees) reached $1.1 million, or $0.13 per share. Investor enthusiasm was fueled by news of a new contract with Husky Technologies Ltd., which could double the firm’s assets under management.

With a market capitalization of about $628 million, Resolute has solid access to capital, though analysts remain cautious on the prospects for the shares. According to CFRA data, the stock is a “hold” and is seen as high risk as of late October 2025. It is not yet clear how the company will build long-term value beyond success-fee income from managed businesses, but its high margins and independent management model are viewed positively.

The industrial sector remains mixed as companies grow more cautious amid uncertainty over tariffs, fiscal spending, and rising costs. According to JPMorgan, the best performers are firms linked to electrification, automation, and business services. Among the bank’s favorites are: Valmont (VMI), benefiting from power-grid investment; Rollins (ROL) and APi Group (APG), supported by steady service demand; and Gates (GTES), where earnings are rebounding with industrial activity. Meanwhile, Carlisle (CSL), Regal Rexnord (RRX), and CSW Industrials (CSW) remain under pressure due to persistent weakness in the U.S. residential-construction market.

This material does not constitute investment advice.

The AI translation of this story was reviewed by a human editor.