We just published our list of the 10 Best Small-Cap Value Stocks to Invest In Nowand Alkami Technology, Inc. (NASDAQ:ALKT) ranked 7th on the list. The slide in AI stocks is prompting investors to explore beyond the market’s leading companies. According to Reuters on November 2, more than 70% of S&P 500 constituents increased in
The slide in AI stocks is prompting investors to explore beyond the market’s leading companies. According to Reuters on November 2, more than 70% of S&P 500 constituents increased in October, despite steep drops in AI-related companies, while small- and mid-cap indexes also advanced. “Investors want to maintain equity exposure. But now they want to reduce AI concentration risk and are adding to areas that offer differentiated sources of return,” said Angelo Kourkafas, senior global investment strategist at Edward Jones. This broadening opens up opportunities for smaller companies whose attractiveness is based on earnings and cash generation rather than enthusiasm for AI spending, a theme Insider Monkey explored in its coverage of Howard Marks’ warnings on AI stocks.
On October 20, the Russell 2000 gained 1.7% and the S&P 500 Value Index jumped 0.9%, while the growth counterpart declined 0.2%. Speaking to Reuters, Jim Baird, chief investment officer at Plante Moran Financial Advisors, said the following:
“Equity investors are still a little skeptical around the AI trade and the ability for some of these companies to monetize their investments, so you’re seeing a bit of a rotation into other areas of the market.”
The shift strengthens the case for looking beyond crowded technology markets to other areas, such the smaller companies profiled in Insider Monkey’s 10 Cheap Small Cap Stocks to Buy Now.
Small-cap value has also provided some safety during the recent slump. In his third-quarter reviewRoyce Investment Partners Co-Chief Investment Officer Francis Gannon noted that the Russell 2000 Value Index fell 4.9%, compared to the Russell 2000 Growth Index’s 9.4% drop. That doesn’t make value stocks immune to losses, but it shows why starting valuation is important when investors are less willing to pay for future growth.
Gannon claims that the opportunity hasn’t disappeared following the rebound. “Today, we see a potentially powerful combination for small-cap investors: accelerating earnings, attractive relative valuations, and low expectations,” he wrote in a commentary published on October 30. He emphasized higher-quality companies with robust balance sheets, sustained profitability, and disciplined capital allocation, a significant distinction between buying cheap businesses and simply buying declining share prices. That distinction also influences stock selection. In this regard, Insider Monkey’s recent 10 Strong Buy Small Cap Stocks to Invest In provides a similar view on smaller companies receiving analyst support.
That said, the rotation still has limitations. Reuters warned that broader market weakness might transform diversification into outright risk reduction. “If the major averages begin to drop in a more compelling manner, it is very likely that investors will stop rotating into other sectors … and start rotating into cash,” Miller Tabak’s Matt Maley wrote in a note. The best small-cap value candidates need more than just a positive market trend: earnings, liquidity, and balance-sheet strength that can endure a less supportive environment.
Our selection process focused on small-cap stocks with forward P/E ratios less than 15 and trailing 12-month revenue growth greater than 20%, with qualifying companies ranked by hedge fund ownership in Q2 2026. Alkami met those requirements, with a forward P/E ratio of 12.32 and trailing revenue growth of 24.04%. 22 hedge funds owned the stock, ranking it sixth on the list.
Alkami Technology, Inc. delivers cloud-based digital banking software to community and regional banks, as well as credit unions. The company’s third-quarter revenues increased 19% to $134.9 million, exceeding the high end of projections, while subscription revenue, accounting for 96% of total revenue, increased 20%. Annual recurring revenue increased 19% to $533 million, and adjusted EBITDA was $26.3 million, a 19.5% margin and more than 530 basis points more than a year ago. The platform now has 323 operational clients and 24.4 million registered users, up 13%. Alkami revised its full-year revenue forecast to $530.5 million to $532.0 million and adjusted EBITDA to $98 million to $99 million. In addition, the company now has a $56 million ARR backlog across 31 new clients.
That said, certain details are less flattering. Revenue per registered user grew just 5% to $21.88, gross margin fell to 63.1% due to a heavier mix of third-party products, and management claimed the quarter benefited from an easier prior-year comparison. At the same time, fourth-quarter guidance implies growth slowing to about 16% to 17%. Those pressures make execution increasingly important. See whether Alkami can turn its community banking niche into a bigger growths story here.
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