Three Outstanding Expansion Stocks Worth Investing in Immediately
The recent post-election market shift has presented intriguing opportunities in small-cap technology stocks. The Russell 2000 index has witnessed a surge of 7.8% since the election, surpassing the S&P 500's modest 4.4% growth, signaling renewed investor interest in smaller companies after a period of large-cap dominance.
This transition to small-caps comes at an ideal time for innovative technology companies that were overlooked during the artificial intelligence (AI) boom. While megacap tech stocks trade at high premiums, many promising small-caps provide enticing entry points after facing pressure from high interest rates and competitive pressures over the past few years.
Let's delve into three innovative companies poised to capitalize on this shifting market trend.
Leading the way in quantum computing
Rigetti Computing (RGTI - 14.86%) is making significant strides in the quantum computing field with an ambitious roadmap. As per the company's Nov. 12 earnings release, Rigetti plans to launch an advanced 36-qubit system by mid-2025, utilizing four 9-qubit chips joined together. This will be followed by a 100-plus-qubit system in the latter half of the year.
Rigetti's superconducting qubit technology presents a significant advantage over competing methods. The system achieves gate speeds of 60 to 80 nanoseconds, which is four orders of magnitude faster than ion traps and pure atoms. This speed difference is essential for hybrid computing applications involving current CPUs and GPUs.
While the revenue was minimal at $2.4 million in Q3 2024, Rigetti's ample $92.6 million cash position sets a firm foundation for executing its development plans. The stock has skyrocketed 209% since Jan. 1 to Nov. 30, 2024, yet remains undervalued considering the quantum computing market's enormous potential, projected to reach between $45 billion and $131 billion by 2040 according to McKinsey.
Transforming AI infrastructure
Applied Digital Corporation (APLD - 4.51%) is undergoing a remarkable transformation from a crypto infrastructure provider to an influential AI computing platform. Applied Digital's fiscal Q1 2025 earnings report released on Oct. 9 reveals a staggering 67% year-over-year revenue increase to $60.7 million. This growth is primarily attributed to the remarkable expansion of its cloud services for AI applications.
Applied Digital recently secured a strategic investment of $160 million from heavyweight investor Nvidia and partner, Related Companies, providing both capital and prestige to its technology approach. The company is also finalizing a lease agreement for a 100-megawatt facility designed for AI applications with a major U.S. hyperscaler. The company aims to grow this capacity to 400 megawatts.
The stock has soared 49.8% since Jan. 1 to Nov. 30, 2024, but the company's rapid transformation points to substantial growth potential. Applied Digital's cloud services segment contributed $25.9 million in revenue for fiscal Q1 2025, underscoring the success of its expansion beyond crypto infrastructure.
With $86.6 million in cash and valuable backing from Nvidia, Applied Digital is well-positioned to scale its AI infrastructure. The planned expansion to 400 megawatts of capacity and booming demand for high-performance computing present a clear path to sustained revenue growth.
Revolutionizing semiconductors
Wolfspeed (WOLF - 26.04%) presents an alluring turnaround opportunity in the realm of silicon carbide semiconductors. Despite a 77.8% decrease from Jan. 1 to Nov. 30, 2024, encouraging developments hint at the company's determination to enhance its position.
As per Wolfspeed's Nov. 6 earnings release, the company has committed to becoming the first pure-play 200-millimeter silicon carbide manufacturer, which is expected to yield $200 million in annual cost savings. Furthermore, Wolfspeed received preliminary approval for $750 million in CHIPS Act funding, accompanied by an additional $750 million from lenders, providing the company with essential capital for U.S. manufacturing expansion.
Recent insider buying reinforces the turnaround story. SEC filings show an influential board member, Glenda Dorchak, purchasing shares at an average price of $8.33 on Nov. 22, following multiple board member purchases. With the stock near multiyear lows and $2.5 billion in newly accessible capital, Wolfspeed offers an appealing entry point for investors willing to bet on silicon carbide's increasing significance in electric vehicles and industrial applications.
Time to act
These unique market conditions present a golden opportunity for these forward-thinking small-cap technology companies. Each company combines groundbreaking technology with specific catalysts that could materialize significant value creation. While not without risk, these stocks provide compelling exposure to quantum computing, AI infrastructure, and next-generation semiconductors at attractive valuations.
The post-election rotation toward small caps, combined with company-specific developments, suggests now is the perfect time for growth investors to consider these pioneering technology leaders. With fortifying insider support and improving business fundamentals, these speculative growth stocks warrant serious consideration from risk-tolerant investors seeking substantial returns.
In light of the renewed investor interest in small companies, now could be an ideal time for individuals interested in finance and investing to consider allocating money towards these innovative technology companies. For instance, Rigetti Computing, with its advancements in quantum computing, presents an undervalued entry point despite its impressive stock growth and substantial potential in the quantum computing market.
Furthermore, Applied Digital Corporation, transforming from a crypto infrastructure provider to an AI computing platform, offers substantial growth potential, having secured a strategic investment from Nvidia and boasting a prominent role in the expansion of AI infrastructure. Thus, investing money in such forward-thinking small-cap technology companies may offer compelling returns for those who are financially inclined and willing to embrace the inherent risks associated with these speculative growth stocks.
