In the fast-moving world of AI investing, smaller companies can often deliver the biggest surprises. While large-cap names dominate the headlines, real pockets of growth frequently emerge further down the market-cap spectrum — where innovation, niche leadership, and accelerating adoption can create outsized opportunities.

This week, we are looking at two small-cap companies making decisive moves within their AI niches. Each has been evaluated using our AIIP (AI Investing Pulse) Methodology* — our proprietary Growth & Momentum model for identifying top-performing AI stocks based on both fundamental strength and relative market performance.

1. Evolv Technologies Holdings, Inc. (EVLV)

• Sector / Industry: Industrials / Security & Protection Services

• AI Stack Layer: Application & Edge (AI in Security, Physical Threat Detection)

• Market Cap: $1.2B

• YTD Performance: 90%

• Profitability: ❌ Not currently profitable

• AIIP Scores:

  • Total Score: 74 / 100

  • RS Score: 89 / 100

• Ranking Status: ✔️ Watchlist

🧠 What the Company Does
Evolv specialises in AI-powered physical security. Its advanced screening systems combine artificial intelligence and sensor fusion to detect weapons and threats in real time — without the bottlenecks of traditional metal detectors. This allows for seamless, high-throughput security checks in busy environments such as stadiums, schools, and transport hubs. Its strengths lie in scalability, instant threat detection, and the growing demand for non-invasive public safety solutions. In simple terms, Evolv’s technology acts like a super-smart security guard that can spot dangerous items as people walk past — keeping crowds moving quickly while still keeping them safe.

💡 Why It Stands Out
With a Total Score of 74 and RS of 89, Evolv now sits comfortably on our Watchlist. Projected revenue growth of 23.5% is paired with an EPS growth forecast of 70.1%—a sign the company is moving meaningfully closer to breaking even and potentially reaching profitability. Its latest earnings showed quarterly revenue up 41.4% year-on-year, reflecting accelerating adoption across sectors from entertainment to critical infrastructure.

📊 Technical View
Evolv is trading above all key moving averages, reinforcing its underlying uptrend. However, the price is approaching a potential double-top formation, with resistance near the highs last seen in 2023, around $8 — a key level to monitor for either a breakout continuation or a pullback.

2. Cerence Inc. (CRNC)

• Sector / Industry: Technology / Software – Application

• AI Stack Layer: Application & Edge (AI in Automotive, Voice Assistance)

• Market Cap: $586M

• YTD Performance: 72%

• Profitability: ❌ Not currently profitable

• AIIP Scores:

  • Total Score: 60 / 100

  • RS Score: 96 / 100

• Ranking Status: 📈 Momentum

🧠 What the Company Does
Cerence develops AI-powered voice assistants for vehicles, enabling natural language conversations between drivers and their cars. Operating in the Application & Edge layer of the AI stack, its software underpins infotainment, navigation, and vehicle control systems — delivering hands-free convenience and enhancing safety in modern mobility. In simple terms, Cerence lets you talk to your car as if you were speaking to a person — whether you want to play music, get directions, or adjust settings, all without lifting a finger.

💡 Why It Stands Out
Cerence’s RS score of 96 puts it among the week’s strongest momentum names. While its fundamentals (Total Score: 60) fall short of our Watchlist threshold, its positive forward PEG ratio suggests that growth expectations are not yet fully priced in. Combined with steady revenue and EPS growth trends, the business appears to be moving closer to profitability — a key milestone for small-cap tech firms competing in fast-moving markets.

📊 Technical View
Cerence is showing strong upward momentum, with moving averages sloping higher and price trading above them on both daily and weekly charts. Yesterday’s 24% surge broke the stock out of a long parallel channel that began in April.

🔍 Final Take

Evolv and Cerence illustrate why small-cap AI stocks deserve attention. Evolv has graduated to Watchlist status, showing a compelling combination of revenue acceleration, improving fundamentals, and strong market momentum in AI-powered security. Cerence, meanwhile, is a pure momentum play with a high RS score, attractive valuation, and a clear path toward profitability in automotive AI voice technology.

Both highlight that in AI, size isn’t everything—execution, adoption, and niche leadership can be just as powerful. Macro factors and disciplined risk management remain essential when tracking these opportunities.

Discover the Next AI Monster Stock — Before the Crowd

Each week we analyze 170+ AI stocks with our proprietary AIIP Model to uncover the companies showing both momentum and fundamentals — not just hype.

From Palantir, Netflix, CoreWeave, Broadcom, Nvidia, Astera Labs and beyond, we’re focused on finding the AI leaders of tomorrow.

👉 We’re about to launch “The AI Stock Pulse”, a new weekly research service for $39/month — but first, we want your quick feedback. It takes 2 seconds to vote below.

🗳️ Cast your vote by clicking one of the links, and as a thank you for voting, you’ll get instant access to our Free Essential Guide to AI Stocks:

🚀 Yes - I would be interested
🚀 Yes - good value
👀 Yes - interested but too expensive 
👀 No - sorry not interested   

💡 What is The AI Stock Pulse?

Each issue delivers:
✅ Full Watchlist — AI stocks that pass our strict criteria (recent names include Palantir, Netflix, CoreWeave, Broadcom, Nvidia, Astera Labs)
📈 Top Momentum Stocks — highest Relative Strength in our AI universe
📊 Top Fundamental Stocks — companies with the strongest underlying fundamentals
🚀 Top Performers — best weekly, monthly, 3–6M, and YTD movers
👀 Ones to Watch — stocks close to qualifying for the Watchlist
📜 Full AI Stock Universe — all 170+ AI-linked stocks we track
🗂 Clear, repeatable format — data-led, no hype, no guesswork

_{Disclaimer - This content is provided for informational purposes only and does not constitute investment advice, personal recommendations, or an invitation to engage in any investment activity. The information presented is derived from publicly available sources and should not be solely relied upon for making investment decisions. Always consult with a qualified financial professional before making investment choices. Past performance is not a guide to future performance.}

_{*Methodology & Scores - All scores are proprietary and calculated using data from Finbox (powered by S&P Global Intelligence). Total Score combines metrics for Sales and EPS Growth, Financial Quality, and Valuation, to assess overall business strength (out of 100). Relative Strength (RS) Score measures a stock’s price performance relative to the AI universe (173 AI-focused public companies). Ranking Status is assigned based on score combinations: Fundamental: Total Score ≥ 70, RS < 80. Momentum: RS ≥ 80, Total Score < 70. Watchlist: Total Score ≥ 70 and RS ≥ 80.}