3 Innovative Small-Cap Tech Stocks: Time to Buy, Sell, or Hold?

Key Points

• Rigetti Computing gains traction with quantum computing, but short-sellers are capping gains. 
• Cerence Inc. provides AI assistants and partners with NVIDIA to advance autonomous driving. 
• Airship AI is expected to grow revenue by 50% in 2025 and for growth to accelerate in 2026 and 2027. 

Innovative small-cap tech stocks like Cerence Inc. NASDAQ: CRNC, Rigetti Computing NASDAQ: RGTI, and Airship AI NASDAQ: AISP are gaining traction. They are gaining traction with their businesses and stock prices, indicating potential for significant gains in 2025. However, these stocks also come with risks. The risk is the short interest and the factors driving it, including capitalization and the revenue outlook. Short-covering fuels their stock price rallies today; the question is whether their markets can sustain traction and trend higher in 2025. 

Rigetti Computing Rockets Higher as Quantum Computing Gains Traction: Sell

Rigetti Computing builds quantum computers and the processors that drive them. It capitalizes on its product offering quantum-computing-as-a-service in various forms. It, too, benefits from a short squeeze and rockets higher with increased volume, which highlights a significant shift in market sentiment. The catalysts for the rally include Rigetti’s advancement of technology, its position within the quantum computing industry, and rapidly improving investor confidence in the technology. Investor confidence in quantum computing was boosted significantly by Google’s Willow chip advancements, which improved performance and reliability. The takeaway is that large-scale, useful quantum computers are just around the corner, and Rigetti will be among the market leaders.  

Catalysts for Rigetti Computing in 2025 include the anticipated launches of a 36- and 100-qubit system by year-end, opening a nearly $8 billion addressable market. If successful, the company’s revenue will grow exponentially from the $15 million expected by MarketBeat’s reported consensus. Risks include capitalization and the balance sheet. The company is on track to deliver its product but may need to raise more cash before it crosses the line to profitability—dilutive action in the first nine months of F2024 diluted shareholder value by more than 30%. 

Cerence Inc. Partners With NVIDIA to Boost Voice AI Power: Hold

Cerence Inc. provides AI assistants spanning various use cases, including mobility, transportation, and autonomous driving. The company focuses on voice/audio assistants and recently expanded on a partnership with NVIDIA. The partnership provides tools to help Cerence scale its business while improving performance and advancing its technology. The guidance for 2025 was on the weak side of consensus but likely cautious, given the expectation for AI growth within the transportation industry. Not only are assistants embedded into legacy ICE and newer EVs, but autonomous driving is also rapidly advancing.

Details from the FQ4 earnings report, including a growing pipeline of business and the NVIDIA partnership, sparked and accelerated a short squeeze in this stock. The short interest was running near 18% at the beginning of December, fueling a 700% spike in the share price and increased volatility that lingered into the New Year. The market is pulling back in early January and will likely enter a consolidation but remains on track to complete a reversal and trend higher in 2025. The critical support target is near $15. 

Airship AI Puts Visual in Video Surveillance: Buy

Airship AI used artificial intelligence and machine learning to power its video surveillance platform. The platform puts “visual” into video surveillance, allowing users to monitor, view, and respond to threats in real time. Clients include a growing number of government agencies and Fortune 500 companies that drive a robust outlook for growth. 

Revenue is expected to grow by 50% in F2025, and growth is forecasted to accelerate over the next three years, with profitability coming next year and improving over time. Analysts rate this stock as a Buy and view it as a deep value, trading beneath the lowest price target issued and with potential for an 80% upside from critical levels at the consensus target.