7/7/2025
By Karina Hernandez, Senior Research Analyst

Small cap semiconductors have been outperforming recently as can be seen in the Russell 2000 Equal Weight Information Technology index and the Russell 2000 Equal Weight Index, excluding information technology.

According to Renaissance Macro Research, small cap semiconductors look great as large cap semiconductors have been acting mediocre except for Nvidia (NVDA), Broadcom Inc. (AVGO), and maybe Micron Technology, Inc. (MU).

Here is a list of small cap semis ideas you could consider adding to your watchlist.

Arteris, Inc. (AIP)

It was founded in 2004 in Paris, France, by semiconductor industry veterans Philippe Boucard, Alain Fanet, and César Douady. The company has grown into a leading provider of System-on-Chip (SoC) interconnect intellectual property (IP). The company is headquartered in Campbell, California, since 2007, pioneering Network-on-Chip (NoC) technology to address the challenges of traditional chip interconnects, such as wire congestion, high power consumption, and slow design times. Under the leadership of CEO K. Charles Janac since 2006, the company has expanded its portfolio through acquisitions like Magillem and Semifore, solidifying its role in SoC integration automation. Arteris’ NoC IP, including FlexNoC, Ncore, and CodaCache, along with tools like Magillem Connectivity, enables faster, power-efficient, and cost-effective chip designs for industries like automotive, AI, 5G, and consumer electronics. With over 3.75 billion chips shipped using its IP as of Q1 2025, Arteris empowers semiconductor companies to innovate by streamlining complex SoC development.

Network-on-Chip is essentially the communication subsystem on a chip that allows for the different parts of the chip to talk to each other. AIP have a competitive advantage in that they have a portfolio of system on a chip components they can license out. However, their advantage is not just in licensing a broad portfolio, but also in offering highly configurable and scalable leading NoC solutions that address the specific needs of complex SoCs with varying components. 

The company has exposure to several rapidly growing niches and trends such as autonomous driving, AI, data centers, chips more generally, industrial onshoring, and robotics. These tailwinds position them well to continue growth as well as expand market share.

Notably, they have exposure across geographies allowing them to fully capitalize on the expected global growth in the Network on Chip niche and expand global market share.

During their latest report the company beat revenue by 3.98% and EPS by 2.7%. The company has a strong execution record with the stock beating expectations for EPS of 4 out of the past 4 earnings and beating revenue on 3 out of the past 4.

One cautionary point is that EPS estimates for FY26 have moved lower.

Technically, the stock broke the 200-day moving average and moved higher in the month following its latest earnings report. While the stock did decline more recently, it was able to bounce off support around $8.87 last week. The next major resistances are around $10 and then $10.67, a break above these levels could take shares higher.

COHU, Inc (COHU)

Cohu, Inc. was founded in 1947 and is a global technology leader supplying test, automation, inspection & metrology products and services to the semiconductor industry.  The company is the leading supplier of semiconductor test handlers and contactors, and a growing provider of automated test equipment, inspection & metrology solutions, and data analytics software to optimize semiconductor manufacturing yield and productivity.

COHU has been operating as a niche player and has seen wild gyrations in the stock from $1 in the 1980s to a huge peak around early 2000s and now trading in the range of $10 to $20 since the year 2000.

In the recent Investor’s Presentation, the company was optimistic about the future and emphasized they are working to end the downturn. The company expects FY25 to increase year-over-year, which could be the first time after three consecutive years of losses.

The company also announced they expect in the next 3 to 5 years revenues in the range of $600 to $800 millon, a non-GAAP gross margin of 48-50% and non-GAAP EPS of $1.50 to $3.25. For comparison, the company reported $402 million in revenues, a non-GAAP loss of $0.23 a share, and a gross margin of 45% in FY24.

The stock has been downturn but has seen the bottom-line hit in April of this year and has now broken above its 20- and 50-day moving average. A break above $21 can take shares to $24.

Navitas Semiconductor Corporation (NVTS)

Navitas Semiconductor Corporation (NVTS) was founded in 2014, and initial funding was provided by the founders plus venture capital from Capricorn Investment Group, Atlantic Bridge, and seed investor Malibu IQ. The company is the leader in the generational shift to gallium nitride (GaN) semiconductor technology in power electronics.

The company invented the first commercial GaN power IC (integrated circuit) marketed as GaNFast. It is a power integrated circuit (IC) that combines several power electronics functions onto a single GaN chip, to improve speed, efficiency, reliability and cost-effectiveness.

The company is bracing itself for a return to top-line growth with GaN adoption growing in several key sectors, including data centers.

Speaking of data centers, NVTS’s GaN and silicon carbide (Sic) devices will be important to power future data centers thanks to their efficiency and speed. Its new 800V aims to introduce energy efficiency of over 90% due to its ultra-high voltage solid state transformers, which are semiconductor based and more efficient than traditional ones.

Nvidia’s collaboration with NVTS could be a game changer and we expect the company’s top-line to grow later this year. In the last three quarter, the company has beat the Street slow and steady.

The stock jumped from under $2 to over $8 per share in less than a month driven by the partnership with Nvidia (NVDA). A break above $7.8 can take the stock to $10 in the long run.

Ouster, Inc (OUST)

The company is a high-growth LiDAR technology company headquartered in San Francisco-based. The present corporation came from its 2023 merger with Velodyne Lidar. These days the company is a leader global provider of LiDAR (Light detection and ranging) sensors and software solutions. 

OUST is trying to close the gap between AI and the physical work as its sensors and software enable integration between AI models and autonomation across industries.

The first quarter results were impressive with the top line growing 26% year-over-year to $33 million, growth which the company has been able to experience since 2021. Gross margin have grown to 41% this quarter, a substantial increase from -2% in March 2023.

On June 11, the company announced that its Ouster OS1 was approved by the Department of Defense for use in unmanned aerial systems. With this news around the defense sector, we believe there is strong evidence for continued margin expansion for the company.

Execution has been improving. The last quarter’s results saw a substantial improvement and the consensus for next year has started to improve.

The stock broke above long-term resistance at the beginning of July ($19) and sees next key resistance at $30.61. The long-term targt is $32.

Karina Hernandez
Wall Street Strategies

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