The Contrarian Edge: 2 Things Soaring Small Caps Have in Common

Subscribers to Chart of the Week received this commentary on Sunday, September 21.

Most of the small cap ink went to the Russell 2000 Index’s (RUT) new record high this week. All the holdings underneath were lumped together, painted with a broader brush as ‘higher’ on rate-cut momentum. The team always gets the credit for a win, but let’s talk about the star players.

Up first, a shoutout to Top 2025 pick Bloom Energy Corp (NYSE:BE), the second-highest holding for the small cap iShares Russell 2000 ETF (IWM). On Tuesday, Morgan Stanley nearly doubled its price target on BE to $85 from $44. The analyst in coverage cited the partnership with Oracle (ORCL), and Bloom’s fuel cells operating the massive power needs of AI data centers. BE closed the week at $82.93, up 273% in 2025.

The fourth-largest IWM holding is IonQ Inc (NYSE:IONQ), the quantum computing maven. Quantum computing has gone from fast-tracked tech of the future to fugazi, fifty times over, all in the last five years. On Wednesday, IonQ announced intentions to acquire Vector Atomic and completed the acquisition of Oxford Ionics. They followed those moves up on Thursday with a memorandum of understanding with Department of Energy to advance quantum technologies in space. IONQ is in the midst of a seven-day win streak and crossed $70 briefly on Friday.

Sector peers Rigetti Computing Inc (NYSE:RGTI) and D-Wave Quantum Inc (NYSE:QBTS) are also notable holdings in IWM, and added 49% and 51% this week, due to not only a halo lift but their own tailwinds: Rigetti was awarded a three-year, $5.8 million contract from the Air Force Research Laboratory. D-Wave highlighted 83% year over year growth in the Asia-Pacific region at its Qubits Japan 2025 conference in Tokyo.

Everything came up quantum this week. No doubt a correction or at the very least some consolidation is coming, but beyond the equity gains, this week was all about the companies planting their flags in the ground, from a legitimacy perspective. It’s even more critical for such a growth sector that saw IONQ and QBTS suffer post-earnings drawdowns of 1.2% and 2.3%, respectively. (Rigetti somehow skated by and gapped higher by 6.1% after earnings).

Another star is Oklo Inc (NYSE:OKLO), the seventh-largest equity holding in IWM and up almost 60% this week alone. Oklo is the Sam Altman-backed, small-module reactor company that’s driving the nuclear energy sector. Uranium stocks got an early-week lift after U.S. Energy Secretary Chris Wright announced plans to increase the national strategic uranium stockpile.

For OKLO, that meant increased downstream demand. On Thursday, the U.S.-U.K. nuclear energy pact gave clean energy stocks another shot in the arm. And similar to the quantum halo lift, Nano Nuclear Energy Inc (NASDAQ:NNE) finished with a weekly gain of 15%.

What’s the common thread between clean energy, quantum computing, and nuclear reactor stocks? All six have shown up on Senior Quantitative Analyst Rocky White’s Short Squeeze screen in the last two reporting periods. Yet despite all these crazy gains this week, all six of those names still have short interest/float (SI/F) ratios of 10% or more. Again, this is after all the melt ups.

 

 

 

It sounds simplistic to beat the short squeeze drum over and over. But if you have a successful play that the defense can’t solve, you don’t stop running it, no matter how simple it is.

Let Your Hedge Fly

This was double the average daily options volume. The VIX has been asleep all September, logging only six wins and never trading higher than 17.50. Per Trade-Alert, the most active contract during that Tuesday pop was the November 55 call, which, wow. Back on earth, the September 15.50 put makes a lot more sense, as does the December 14 put. I asked Senior Market Strategists Chris Prybal and Joe Hargett about the huge out-of-the-money calls.

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