Aeva Technologies, Inc.

Applied Digital Corporation

Pagaya Technologies Ltd.

NVIDIA Corporation

The excitement around artificial intelligence is heating up not only the securities of technology giants. Against the background of record quarterly reports of Big Tech and growing optimism of Wall Street, investors are finding undervalued ideas in the small capitalization segment. The biggest gainers are companies creating infrastructure for AI development - from building data centers to supplying specialized equipment and solutions.

Not just Big Tech: Which small-cap companies are benefiting from the development of AI

In the weeks ahead, the Russell 2000, the benchmark for U.S. small-cap stocks, may continue to <a href="https://www.bloomberg.com/news/articles/2025-08-25/bofa-ubs-see-small-cap-outperformance-as-powell-turns-dovish?embedded-checkout=true">outperform</a>&nbsp;large-cap peers. In remarks in Jackson Hole on Friday, August 22, Fed Chair Powell <a href="https://en.oninvest.com/article/s-amp-p-500-posted-its-best-gain-since-ma-dow-has-first-record-of-the-year-powell-inspired-the-market">signaled</a>&nbsp;that interest rates could be cut as early as September. The remarks lifted all major equity indexes, while the iShares Russell 2000 ETF <a href="https://www.bloomberg.com/news/articles/2025-08-25/bofa-ubs-see-small-cap-outperformance-as-powell-turns-dovish?embedded-checkout=true#:~:text=Investors%20responded%20accordingly%2C%20injecting%20the%20most%20cash%20into%20the%20iShares%20Russell%202000%20ETF%20since%20November.">drew</a> its largest inflows since November 2024.

BofA, UBS eye small-cap outperformance after Powell's dovish remarks

For the sixth month now, U.S. President Trump has been waging a zigzagging trade war. Since “Emancipation Day” on April 2, when he announced the <a href="https://www.cnbc.com/2025/04/03/us-tariff-rates-under-trump-will-be-higher-than-the-smoot-hawley-levels-from-great-depression-era.html">largest tariffs</a> in nearly a century, several countries, including the <a href="https://www.nytimes.com/2025/05/07/business/economy/trump-trade-britain.html">UK</a>&nbsp;and <a href="https://www.reuters.com/business/trump-strikes-tariff-deal-with-japan-auto-stocks-surge-2025-07-23/">Japan</a>, along with the <a href="https://www.cnbc.com/2025/07/27/trump-european-union-eu-trade-tariffs.html">EU</a>, have already managed to get a deal done to reduce the new tariffs. On August 11, Trump temporarily <a href="https://oninvest.com/article/tramp-prodlil-na-90-dnej-dedlajn-dla-povysenia-poslin-v-otnosenii-kitaa-smi">delayed</a>&nbsp;the introduction of tariffs on Chinese goods. During this period, shares of large companies climbed to new highs, while the weakness of small-cap stocks became more apparent.

Tariffs weigh on small caps, investors ponder next moves

Alphabet Inc.

Intel Corporation

UnitedHealth Group Incorporated

Berkshire Hathaway Inc.

US and Russian Presidents Donald Trump and Vladimir Putin held talks on Ukraine in Alaska on Friday. On his way to Anchorage, Trump told reporters that duties on chip imports could reach 300%. Earlier in the week, USA stock markets rose to new records amid expectations of a Fed rate cut. Perplexity unexpectedly offered to buy Google's Chrome browser, and the US administration is exploring buying a stake in Intel. Sam Altman is preparing to launch a startup that will become a competitor of Elon Musk's Neuralink - the rivalry between them is intensifying. The main events of August 11-15 are in our review.

Highlights of the week: US-Russia summit, White House and Intel stake, buyer for Chrome

Small caps are again the spotlight, but not because they are outperforming. According to Refinitiv Lipper data as of August 4, investors have pulled $94.7 billion from U.S. small-cap funds since the start of the year, including $47.3 billion in July alone – the largest monthly outflow in 5 years. That figure also far exceeds the total for the second quarter, when withdrawals reached $30.3 billion, the highest quarterly outflow since 2020. Despite occasional rallies, small caps have trailed large caps by a wide margin. In the first seven months of the year, the S&amp;P 500 rose about 6.5%, while the Russell 2000 fell roughly 1.0%.

Small-cap ETFs see biggest outflow in 5 years in July: Why not to shun the segment

Super Micro Computer, Inc.

In July, investor attention shifted away from tech giants and AI toward small-cap stocks that had long lingered in the shadow of Big Tech. Since the start of July, the Russell 2000 index has climbed 3.8%. By comparison, the S&amp;P 500 has gained 3.0%, the Nasdaq Composite 4.0%, and the Dow Jones Industrial Average 1.7%, according to FactSet data. The outperformance suggests a broader market rotation is underway: from high-valuation tech names to more economically sensitive sectors.

Small caps outpacing the S&P 500 in July: What's driving the rally and will it last?

The short position on the small-cap&nbsp;Russell 2000 index is $16 billion. Thus, the market is showing uncertainty about the resilience of the U.S. economy. But the prospect of Fed rate cuts provides some backstop, analysts believe.

Short position on Russell 2000 at four-year high as hedge funds doubt small-cap rally

Tesla, Inc.

Delta Air Lines, Inc.

Trump's new statements on duties on copper and goods from Brazil did not have the same impact on the market as it did in April

Nvidia sticks above $4 trillion, S&P 500 and Nasdaq hit new records: trading results

A gauge of investor sentiment from Bloomberg Intelligence “approached manic” in June. This could portend a relative downturn in the small-cap space, however.

Why small-cap investors should be wary of 'manic' sentiment in markets

Analysts see July as the best month for the broad market index

Goldman Sachs predicted the timing of the end of the S&P 500 rally

Broadcom Inc.

Nvidia stock gains pull tech indexes higher

Nasdaq 100 index hits record for the first time since the imposition of duties and the Iran crisis

Trump calls Iranian attack weak: not a single missile reached its target, claims US president