Enthusiasm Over Artificial Intelligence Boosted Nova Ltd. (NVMI) in Q2

Wasatch Global Investors, an asset management company, released its “Wasatch Small Cap Growth Strategy” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. U.S. small-cap stocks experienced significant gains this quarter, despite volatility. They initially dipped after President Trump announced unexpectedly high tariff rates, but quickly rebounded as his economic team showed signs of softening their stance. Against this backdrop, the Strategy performed in line with the Russell 2000® Growth Index’s 11.97% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Wasatch Small Cap Growth Strategy highlighted stocks such as Nova Ltd. (NASDAQ:NVMI). Nova Ltd. (NASDAQ:NVMI) designs and develops process control systems used to manufacture semiconductors. The one-month return of Nova Ltd. (NASDAQ:NVMI) was -3.40%, and its shares gained 49.46% of their value over the last 52 weeks. On August 4, 2025, Nova Ltd. (NASDAQ:NVMI) stock closed at $272.75 per share, with a market capitalization of $8.019 billion.

Wasatch Small Cap Growth Strategy stated the following regarding Nova Ltd. (NASDAQ:NVMI) in its second quarter 2025 investor letter:

"Two of the strategy’s top contributors to performance were technology companies, Fabrinet (FN) and Nova Ltd. (NASDAQ:NVMI). Fabrinet makes optical components that are used in data centers. Nova sells metrology and process control systems used in semiconductor manufacturing. Both businesses have benefited from the increasing use of artificial intelligence (AI). While fundamentals for the two companies remain strong, AI has been a popular investment theme and that likely played a larger role in fueling the stocks’ rise."

Nova Ltd. (NASDAQ:NVMI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Nova Ltd. (NASDAQ:NVMI) at the end of the first quarter, compared to 26 in the fourth quarter. Nova Ltd.’s (NASDAQ:NVMI) total revenues in Q1 2025 hit a record $213 million, marking fourth straight quarter of all-time highs. This represents a 10% increase quarter over quarter and a 50% increase year over year. While we acknowledge the potential of Nova Ltd. (NASDAQ:NVMI) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Nova Ltd. (NASDAQ:NVMI) and shared billionaire Jim Simons’ RenTech’s small-cap stock picks with huge upside potential. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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