In this article, we discuss 12 best small cap tech stocks to buy. If you want to skip our detailed discussion on the tech industry, head directly to 5 Best Small Cap Tech Stocks To Buy.
The tech industry experienced significant fluctuations during the pandemic, with strong performance in 2020 to 2021 but facing stock market declines in 2022. In 2023, tech companies continue to face challenges related to economic uncertainty, supply chains, workforce, and innovation. In the past five years, AI adoption has been driven by cost savings and gaining a competitive advantage. AI integration into user-facing applications has been subtle, leading to increased user counts and platform traffic. However, in early 2023, AI has gained significant attention and become a focal point for marketing. Despite this, RSM data indicates that private equity investment in emerging tech, particularly AI, remains low. Innovative AI companies often attract interest from large corporate buyers who incorporate their technology into existing services or scale it for larger markets. Microsoft CEO Satya Nadella describes the current generation of AI as “autopilot” dictating attention through recommendations in search engines, social media, and streaming services. The next generation of AI, according to Nadella, will be a “copilot” that can be programmed using natural language, providing easier access to the software’s capabilities for all users.
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According to JPMorgan’s “Business Leaders Outlook Survey” conducted between November 29 and December 13, 2022,in which 265 midsize tech industry respondents expressed their views, majority of tech leaders were optimistic about the global (57%), national (58%), and local (63%) economies, significantly higher than leaders from midsize American businesses in general. Additionally, 77% were optimistic about their industry’s performance in 2023, with 85% expressing optimism about their own company’s performance. 84% of tech leaders anticipated increases in revenue/sales, and 73% expected growth in profits. Despite their positive outlook, tech leaders also expect challenges ahead. 55% of the candidates forecasted a recession in 2023. 76% were already feeling the effects of inflation, and nearly half had experienced worsening supply chain issues over the past year. To address these pressures, 51% of tech leaders were primarily focusing on raising prices and 43% were looking to increase automation. However, these challenges don’t seem to hinder growth plans, as 84% of tech leaders intend to hire or retain employees in 2023. Approximately half of the respondents are coping with the tight labor market by offering employees flexibility in terms of where and when they work.
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McKinsey observed that investment in most tech trends tightened compared to previous years in 2022, but there is still high potential for future growth, evident from the recent rebound in tech valuations. The total investment in tech exceeded $1 trillion, reflecting strong confidence in the field. Trust architectures and digital identity experienced the most remarkable growth among the 14 technology trends, increasing by nearly 50% as security, privacy, and resilience became crucial across industries. On the other hand, investment in other trends like applied AI, advanced connectivity, and cloud and edge computing declined, likely due to their maturity.
To benefit from the explosive growth potential in tech, some of the best stocks that come to mind include Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META). However, in this article, we discuss the best small-cap tech stocks to buy.
Our Methodology
We first used a stock screener to filter out technology stocks with market caps ranging from $300 million to $2 billion as of July 28. From these stocks we picked 10 stocks with the highest number of hedge fund investors. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the first quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm.
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Best Small Cap Tech Stocks To Buy
12. Agilysys, Inc. (NASDAQ:AGYS)
Number of Hedge Fund Holders: 23
Agilysys, Inc. (NASDAQ:AGYS) develops and sells hardware and software products and services to the hospitality industry. The company provides solutions like point of sale systems, property management, inventory and procurement, payments, activity scheduling, and reservations management to improve the guest experience.
On July 24, Agilysys, Inc….
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