We recently compiled a list of the 15 Best Small Cap AI Stocks to Buy Right Now. In this article, we are going to take a look at where DXC Technology Company (NYSE:DXC) stands against the other small cap AI stocks.

Smaller-cap AI stocks may present potentially attractive investment opportunities for investors seeking exposure beyond the already well-known Big Tech giants. Many of these companies operate quietly under the radar, developing specialized AI products, software, and applications that could significantly impact various sectors, from healthcare and finance to cybersecurity and manufacturing. While large-cap technology leaders have already benefited greatly from early enthusiasm and experienced significant stock-price appreciation during calendar 2023-2024, smaller AI-focused companies often remain relatively undiscovered and undervalued. This positions them as potential second-wave beneficiaries, providing investors with an attractive entry point into the next stage of AI-driven growth. As the market increasingly recognizes the commercial viability and disruptive potential of these innovative, smaller-cap players, their stocks could offer substantial upside compared to their larger, more mature counterparts.

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The first wave of AI beneficiaries during 2023–2024 was largely limited to GPU manufacturers, semiconductor equipment providers involved in GPU production, and Big Tech companies that acquired GPUs and built data centers to secure the computing power needed to support the AI revolution. However, after two years of aggressive spending, 2025 is shaping up to be the year that determines whether further capacity is truly needed. The actual capabilities of AI remain largely at the level seen in early 2023 when ChatGPT was first introduced. With no major technological breakthrough to date, analysts have begun to question whether such massive hardware investments are justified. The issue was further amplified in January 2025, when a Chinese startup claimed to have trained an AI model with performance comparable to U.S. large language models – at only a fraction of the cost. If true, the Chinese firm DeepSeek could disrupt the AI training and inferencing market, potentially undermining the prevailing thesis that the world needs hundreds of billions in GPU infrastructure to meet computing power demand.

The aforementioned developments may have important implications for global markets. On one hand, the first-wave beneficiaries of AI could face a correction as demand for GPUs weakens and the substantial hardware investments made in 2023–2024 prove excessive. On the other hand, a second wave of beneficiaries may emerge, as Chinese technology drives down the cost of AI training and inferencing, effectively lowering barriers to entry for startups and companies operating on tight budgets. With significantly reduced costs to enter the market, hundreds of startups and small-cap companies may accelerate the development of AI products and solutions with practical, mass-market use cases. If successful, we could witness the rise of an entirely new cohort of winners. With that in mind, the key takeaway for readers is that this may be the right time to look for potential second-wave AI winners – particularly among small-cap companies with market capitalizations under $5 billion.

Also, macroeconomic conditions may become more favorable in the coming quarters, further supporting smaller-cap companies. Despite the Fed keeping interest rates steady at the latest FOMC meeting, we believe that deteriorating GDP growth forecasts from the Atlanta Fed – driven by early Trump 2.0 policies – may increase the likelihood of interest rate cuts in upcoming meetings. This view is reinforced by the impending public debt rollover, which may need to be financed at lower interest rates to maintain the US debt servicing capacity at reasonably healthy levels. Lower interest rates are generally favorable for small caps, as they reduce financing costs and support capital allocation toward growth projects.

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Our Methodology

For this article, we used Finviz to screen for technology stocks under a $5 billion market cap. Although small-cap stocks typically have a market cap under $2 billion, we included companies below $5 billion to add more AI firms. We then manually selected companies that have significant revenue exposure or potential growth opportunities related to AI products & solutions. Finally, we compared the list with our proprietary Q4 2024 database of hedge funds’ ownership and included in the article the top 15 stocks with the largest number of hedge funds that own the stock.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

DXC Technology Company (NYSE:DXC)

Number of Hedge Fund Holders: 24

​DXC Technology Company (NYSE:DXC) is a global provider of IT services and solutions, specializing in digital transformation, IT modernization, cloud computing, cybersecurity, analytics, and business process outsourcing. The company serves clients across multiple industries, including financial services, healthcare, insurance, manufacturing, public sector, and transportation. Its core offerings include consulting, systems integration, software development, application management, infrastructure services, and data-driven analytics. DXC is actively expanding its capabilities in AI, providing AI-driven solutions, automation platforms, and advanced analytics, positioning itself for potential growth opportunities in the expanding AI market.

DXC Technology Company (NYSE:DXC) delivered strong Q3 performance with revenue, adjusted EBIT margin, and non-GAAP EPS exceeding guidance. The company’s financial metrics showed total revenue declined 4.2% YoY on an organic basis, while adjusted EBIT margin expanded 140 basis points year-over-year to 8.9%, and non-GAAP diluted EPS grew 7% YoY to $0.92. The company demonstrated significant improvement in bookings with a book-to-bill ratio of 1.3x, the highest in 8 quarters, reflecting the success of their revamped go-to-market approach. The pipeline continues to grow with a higher mix of deals in consulting and engineering services, though these engagements have less near-term revenue impact but build a foundation for future growth.

DXC Technology Company (NYSE:DXC) is actively investing in AI capabilities, as evidenced by new partnerships with SAP and ServiceNow, and successful implementations for clients like Singapore General Hospital and Ferrari. The company faces ongoing global uncertainties including trade policy, geopolitical conflicts, inflation, and labor costs which continue to pressure corporate spending for discretionary projects, while clients balance cost optimization with investments in AI-driven transformation programs. Looking ahead, DXC’s top priority remains driving profitable and sustainable revenue growth, with a focus on establishing a culture grounded in client centricity, performance management, and accountability. With 24 hedge funds owning the stock, DXC is one of the best small cap AI stocks to buy right now.

Overall DXC ranks 15th on our list of the 15 best small cap AI stocks to buy right now. While we acknowledge the potential of DXC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DXC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.