When stocks hit highs, investors must decide whether to let their winners ride or cut back and take profits. The decision usually depends on your risk tolerance and investment timeline, but it’s important to research each company before making any buy or sell decisions. And in the case of smaller stocks, you’ll need to prepare for less volatility if you decide to hold.
Small caps are more volatile than large stocks because these companies tend to have volatile earnings and low (or negative) earnings. Most small caps trade on a potential basis, so risk management is important when sizing positions and making trades. Although all-time highs often precede all-time highs, smaller companies still tend to pull back quickly which may provide better entry points if the long-term trend holds.
Three small companies have recently grown to the highest level: AXT Inc. NASDAQ: AXTINWPX infrastructure NASDAQ: NWPXand Ateris Inc. NASDAQ: AIP. Is it time to take a profit, or do these stocks still have ends ahead?
AXT Inc: Powering the Growing Data Center for Surgical Power
AXT today
As of 05/8/2026 04:00 PM Eastern
- 52 week interval
- $1.24
▼
$129.43
- Target Value
- $22.80
Based in Fremont, AXT is a semiconductor wafer manufacturer specializing in critical substrates, including indium phosphide (InP).
InP-like substrates are used to connect photodetectors to high-speed optical transceivers, which are an important part of AI data center infrastructure.
Data center energy efficiency is expected to be a major goal for companies like AXT; the Lawrence Berkeley National Laboratory estimates that total data center energy consumption could reach 580 TWh by 2028, more than three times what data centers used in 2024.
InP is the catalyst driving AXTI shares up nearly 600% year to date (YTD). During the company’s Q1 2026 earnings call on April 30, management reported revenue of $26.9 million, while InP sales accounted for more than half at $13.6 million. Net loss also narrowed to 0.01 cents per share, and the company actually projects Q2 EPS between 0.06 cents and 0.08 cents.
Both earnings per share (EPS) and revenue exceeded analyst consensus estimates, and Q2 guidance shows the company is on track for its first profitable quarter since 2022. Also, the $100 million backlog provides plenty of revenue for years to come.
AXTI’s 500% increase boosted the company’s market cap to more than $7 billion, but the stock now trades at 80 times sales, and investors would be wise to watch for a pullback following April’s $550 million equity raise.
Shares are standing near a recent daily high of $110, allowing the Relative Strength Index (RSI) to move out of overbought territory. But the Moving Average Convergence Divergence (MACD) indicator formed a bearish crossover, suggesting a decline in buying momentum.
The long-term growth story remains in place with strong backlog and data fundamentals, but valuations and technical signals are short-term red flags.
NWPX Infrastructure: A Water Infrastructure Provider With Multi-Decade Tailwinds
NWPX Infrastructure Today
NWPX infrastructure
As of 05/8/2026 04:00 PM Eastern
- 52 week interval
- $37.99
▼
$114.27
- The P/E ratio
- 26.29
- Target Value
- $90.00
Now we’re stepping outside the tech industry with a company that has potential headwinds beyond the AI and data center boom.
According to the Environmental Protection Agency (EPA), the US water infrastructure will need more than 625 billion dollars in improvements over the next two decades.
Replacing the multibillion-dollar pipeline infrastructure is a long-term goal of NWPX Infrastructure, which manufactures concrete pipes and infrastructure. Business is booming so far this year: the company recently reported record quarterly revenue of $138 million and EPS of $1.08, the latest deal beating consensus by nearly 40%. The company’s backlog now exceeds $430 million, and its cash position is expected to end in 2026 between $50-56 million.
NWPX is up 75% YTD, but is still undervalued relative to market benchmarks. The stock trades at 22 times forward earnings and a Price-to-Sales (P/S) ratio of 2.01, and its balance sheet shows almost zero debt.
Shares jumped more than 25% in the week following the Q1 2026 earnings call on April 30, and technical signs are in place for an extended rally. The stock is now trading above its 50-day moving average, but there is little concern of a violent pullback given its fundamental strength and relatively low beta (1.06).
Arteris Inc: High Margin Licensing Model Optimized for AI Training Workloads
Arteris Today
As of 05/8/2026 04:00 PM Eastern
- 52 week interval
- $6.88
▼
$32.11
- Target Value
- $20.17
Ateris is a $1.37 billion ‘picks and shovels’ market player in the semiconductor industry.
Instead of building fabric to manufacture chips, Arteris develops communication and integration software that connects various CPUs and GPUs.
This System-on-a-Chip (SoC) is sold in a standard software model, with high-quality intellectual property licenses that must be renewed. Gross margins reached 92% in fiscal Q4 2025, and full-year revenue of $70.6 million was a 22% YOY increase.
The company has long-term structural problems from the growing burden of AI training, as each GPU cluster requires an IP license to transfer data.
The stock broke out of a multi-month rallying pattern following the announcement of the company’s partnership with MIPS, gaining more than 60% in just 30 days.
The next catalyst is just around the corner, too; Q1 2026 financial results are due on May 12, and the company will need to continue to post strong booking numbers to justify its new rating.
Before you consider AXT, you’ll want to hear this.
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