Top small cap stocks to watch in 2025
Small cap stocks aren’t considered as frequently as their larger counterparts in terms of worthy investments. They can sometimes be purchased at lower valuations than larger companies, due to being undervalued. But trading small cap companies comes with its fair share of risks. Learn about these and our top five picks to watch right now.
Important to know
This article is for informational purposes only and does not constitute investment advice. Please ensure you understand the risks and consider your individual circumstances before trading.
Key takeaways
- Small cap companies are those with a valuation of between $250 million and $2 billion
- Small cap stocks are often high-risk, high-reward
- We examine five small cap companies making waves right now: Consolidated Water, Evolv Technologies, Innodata, Magnite and Serve Robotics
What are small cap stocks?
Small cap stocks are the shares of companies with a market capitalisation of between $250 million and $2 billion.
They’re smaller than mid cap and large cap companies, and often represent businesses in the early stages of their growth – and those in emerging industries.
Category |
Market cap |
Example |
Micro cap |
Less than $250 million |
Koss Corp |
Small cap |
$250 million to $2 billion |
Innodata |
Mid cap |
$2 billion to $10 billion |
Mattel Inc |
Large cap |
$10 billion to $200 billion |
Intel Corp |
Mega cap |
More than $200 billion |
Apple |
Advantages of small cap stocks
There are numerous pros to stock trading small cap shares. Here are a few of the more important ones:
- Growth potential: smaller companies have greater room for expansion
- Diversification: small cap businesses tend to operate in up-and-coming sectors, offering stock traders a good way to diversify their portfolios. This also means you have access to innovation
- Potentially higher returns: small cap stocks can be a high-risk, high-return strategy
- Undervalued opportunities: because analysts and institutional investors tend to spend less time looking at small cap stocks compared to larger ones, you might find a good opportunity with an undervalued stock
Disadvantages of small cap stocks
There aren’t just benefits to stock trading small cap shares. Here are some of the pitfalls to watch out for:
- Higher volatility: unlike their larger, more established counterparts, small cap stocks tend to be quite a lot more volatile. This is often due to their limited resources, so what they choose to spend these on greatly affects their performance and share price
- High risk: because they’re not yet established, small cap stocks pose a higher risk for stock traders
- Lower liquidity: small cap shares tend to be stock traded less, which makes them less liquid than larger companies
Top 5 small cap stocks to watch in 2025
We’ve chosen our five stocks to stretch across sectors – utilities, AI, defence, advertising and logistics, as well as for:
- Expansion and evolution into new markets, indicating excellent potential for future growth
- High-growth sectors, such as AI
- Long-term contracts that provide recurring business – offering some degree of predictability in cash flow
- Companies in sectors that can withstand economic downturns
Overview of the stocks in this article
Of the five stocks in this article, Consolidated Water Company Limited and Innodata Inc are available to trade via CFDs with IG UAE.
Consolidated Water Company Limited, Evolv Technologies Holdings, Inc., Innodata Inc, Magnite Inc and Serve Robotics are all available to trade via non-leveraged stock trading with IG UAE.
Company |
Sector |
Market cap |
Highlight |
Utilities |
Approximately $480 million |
Produces potable water using desalination |
|
AI and defence |
$924.94 million |
Products screen for concealed weapons without the need for manual search |
|
AI |
$1.60 billion |
Supports generative AI model builders and adopters |
|
Advertising |
$490.918 million |
Largest independent sell-side ad-tech platform globally |
|
Logistics |
$609.51 million |
Develops and deploys autonomous sidewalk robots |
1. Consolidated Water Company Limited (NASDAQ: CWCO)
Industry: Utilities
Market cap: $493.42 million1
Overview:
Consolidated Water is a US-based company that produces potable water and manages wastewater systems. It operates desalination plants using reverse osmosis technology in locations such as the Bahamas, the Cayman Islands, and Grand Cayman2. The company has grown recently through acquisitions and partnerships aimed at upgrading aging water infrastructure.
Market context:
With increasing populations and climate-driven droughts in many regions, demand for reliable potable water solutions continues to rise, positioning Consolidated Water well for future growth.
Key highlights:
- Plans to introduce advanced membrane technologies and digital monitoring systems
- Declared a $0.14 per share dividend for Q3 20253
- Its subsidiary Kalaeloa Desalco LLC secured a $204 million contract to build and operate a 1.7 million gallon-per-day desalination plant in Hawaii4
2. Evolv Technologies Holdings, Inc. (EVLV)
Industry: AI and defence
Market cap: $924.94 million5
Overview:
Evolv Technologies develops AI-driven weapons detection security systems designed for schools, stadiums, transit hubs, and corporate offices. Founded in 2013 and headquartered in the US, its flagship Express system uses millimetre-wave sensors combined with AI to detect concealed weapons without manual searches.6 The company is expanding its presence into Europe and Asia-Pacific.
Market context:
As concerns about public safety increase worldwide, demand for efficient, non-intrusive security screening is growing, giving Evolv a competitive edge.
Key highlights:
- Q1 2025 revenue rose 44% year over year7
- Adjusted EBITDA was $1.7 million in Q1 20257
- Recognised as a Qualified Anti-Terrorism Technology (QATT) by the US Department of Homeland Security8
3. Innodata Inc (NASDAQ: INOD)
Industry: AI
Market cap: $1.60 billion9
Overview:
Innodata provides AI-powered data engineering services supporting generative AI models through platforms such as Agility and GoldenGate. Operating across the US, Canada, and Asia, it offers data annotation, document processing, and model evaluation to clients in Big Tech, government, healthcare, and publishing sectors.10
Market context:
The company plays a vital role in the AI value chain, helping major organisations implement large-scale AI projects.
Key highlights:
- Adjusted EBITDA increased by $8.9 million year over year to $12.7 million11
- Generated $58.3 million in revenue in Q1 202511
- Services clients like Google, Deloitte, Apple, and Amazon10
4. Magnite, Inc. (NASDAQ: MGNI)
Industry: Advertising
Market cap: $490.918 million12
Overview:
Magnite is the largest independent sell-side advertising technology platform worldwide, launched in 2020. It enables publishers to monetise streaming content inventory through real-time bidding and works with major streaming services such as Spotify and Netflix.13
Market context:
Antitrust actions against Google's ad technologies have opened market-share opportunities for Magnite, which continues expanding its data analytics offerings and supports connected TV (CTV) and over-the-top (OTT) environments.
Key highlights:
- Q1 2025 revenue was $155.8 million, up 4% year over year14
- Operating cash flow of $18.2 million14
- Launched a next-gen version of SpringServe, its video ad platform for CTV and OTT15
5. Serve Robotics Inc. (NASDAQ: SERV)
Industry: Logistics
Market cap: $609.51 million16
Overview:
Serve Robotics develops autonomous delivery robots designed for urban environments, focusing on last-mile deliveries in the food and beverage sector. The company aims to improve delivery efficiency while reducing emissions with low-emission robots. It partners with companies such as Uber Eats and 7-Eleven to expand its US presence.17
Market context:
With growing demand for contactless and sustainable delivery solutions, Serve Robotics' AI-powered self-driving technology positions it well for growth in key urban markets.
Key highlights:
- Contracted to deploy 2,000 robots with Uber Eats by end of 202518
- Expanded operations to Los Angeles, Miami, Dallas-Fort Worth, and soon Atlanta17
- Uses out-of-home advertising to supplement delivery revenue17
- Released Gen 3 robot in October 2024 with improved range, speed, capacity, and 65% cost reduction19
How to trade small cap stocks with IG UAE
CFDs
- Open a CFD trading account with IG UAE
- Search for small cap stocks on the IG platform
- Decide whether to go long (buy) or short (sell)
- Choose your position size
- Set stop-loss and limit orders
- Place your trade and monitor it
Stock trading
- Open a stock trading account with IG UAE
- Search for small cap stocks available for direct ownership
- Choose the stock you want to buy – try our stock screener
- Determine how many shares you want to purchase
- Place your order
- Monitor your investment and collect any dividends
FAQs about small cap stocks
Should I trade small cap stocks?
To determine whether small cap stocks are worth it to trade, you need to figure out your risk tolerance. If you’re risk averse, small cap stocks might not be the best for you, as they can be highly volatile and don’t have the same stability as their larger counterparts.
What’s the difference between micro and small cap stocks?
Micro cap stocks are those with a valuation under $250 million, whereas small cap stocks’ valuations are between $250 million and $2 billion.
For how long should I trade in a small cap company?
Deciding how long to trade in a small cap company is a question with a complex answer. It depends on how well the stock performs, how quickly it grows, whether it becomes overvalued, whether it continuously introduces innovations or moves into new markets, among other factors.
How do small cap stocks’ returns compare to those of large cap stocks?
Traditionally, successful small cap stocks have had higher returns than large cap stocks, but over the past few years this has changed due to the rise in use of AI – and the large cap stocks that dominate that space.
What is market capitalisation?
Market capitalisation (or market cap) is the current value of a publicly traded company. The value is derived from the total value of its outstanding shares. It’s not a fixed figure; it constantly changes depending on what shares are worth and, therefore, what the market thinks the company is worth.
Why is market cap used in financial analysis?
A company’s market cap is a significant marker of its health, among other things; it signifies the company’s stability and potential risk. Financial analysts also use market cap to determine whether a business is over- or undervalued. In addition, it’s used to compare a company with competitors in its sector to determine whether it makes for a worthwhile investment.
Footnotes
- TradingView, July 2025
- Consolidated Water Company, Company Overview, 2025
- Consolidated Water Company, June 2025
- Consolidated Water Company, May 2025
- TradingView, July 2025
- Evolv Technologies, Company Overview, 2025
- Evolv Technologies, Q1 2025 Earnings Report
- US Department of Homeland Security, QATT Designation, 2025
- TradingView, July 2025
- Innodata Inc, Company Overview, 2025
- Innodata Inc, Q1 2025 Earnings Report
- Simply Wall St, July 2025
- Magnite Inc, Company Overview, 2025
- Magnite Inc, Q1 2025 Earnings Report
- Magnite Inc, SpringServe Platform Launch, 2025
- TradingView, July 2025
- Serve Robotics Inc, Company Overview, 2025
- Serve Robotics Inc, Uber Eats Partnership Agreement, 2025
- Serve Robotics Inc, Gen 3 Robot Launch, October 2024
Important to know
This information has been prepared by IG Limited (DFSA reference No. F001780). It is intended for general information purposes only and does not take into account your personal objectives, financial situation or needs. It should not be regarded as investment advice or a recommendation. Trading CFDs carries a high level of risk and professional clients can lose more then they deposit. Please ensure you fully understand the risks involved and seek independent advice if necessary. All information is accurate at the time of publication and may be subject to change.
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