The best and worst US small cap stocks of first half 2023


Bitcoin miners are surging thanks to a strong year for crypto, while ChatGPT is slamming stocks like online study-help company Chegg.

Investors who kept the faith in the stock market after steep losses in 2022 have been handsomely rewarded in the first half of this year, with the S&P 500 Index up 14%, fueled by massive gains for megacap tech stocks like Nvidia (up 189%), Meta Platforms (138%) and Amazon (55%). But investing in small-cap companies has been more hit-or-miss.

The Russell 2000 Index has gained a more tepid 7.2% this year and remains 23% lower than its November 2021 record high. Small cap stocks are typically more vulnerable to rising interest rates, limiting their access to debt markets, and slowing economic growth. The regional banking crisis set off by the failure of Silicon Valley Bank also hampered the returns of the Russell 2000, which has a 14% weight to the financials sector.

Still, small-cap stocks gained ground as a group, and many of the first half’s biggest winners came from an industry that was arguably 2022’s biggest loser: crypto. Bitcoin mining stock Bit Digital soared 627%, and peers Cipher Mining and Applied Digital weren’t far behind. All three are among the four top-performing U.S.-listed stocks of 2023 so far with market capitalizations between $300 million and $2 billion. Marathon Digital Holdings, the largest bitcoin miner with a current market cap of $2.3 billion, is up 297% this year. These stocks’ performance is closely correlated with the price of bitcoin, which is up 85% this year to more than $30,000.

“The stock of a miner gives you bitcoin exposure without being involved in a bitcoin network, using traditional finance infrastructure,” says Kevin Dede, an analyst at H.C. Wainwright. “You don’t have to worry about a wallet.”

When bitcoin finished 2022 at around $16,500, a two-year low, mining was a money-losing endeavor for some companies whose energy costs were higher than that. Bitcoin mining requires vast amounts of computing power to solve complex mathematical puzzles and mine each block, which comes with a block reward of 6.25 bitcoins. That reward is halved roughly every four years, with the next halving expected to occur in April or May 2024.

Until then, the current elevated bitcoin price offers some breathing room for these miners, some of which were on life support last year. Several prominent crypto companies like FTX, Three Arrows Capital, Voyager Digital and Celsius Network collapsed or went bankrupt, casting a cloud over the industry, and Cipher Mining and Bit Digital were both trading at 40 or 50 cents per share at their low points. Bit Digital shares are now at $4.32, with Cipher trading at $2.92 per share.

Rivaling Bit Digital in the rest of the small-cap space, San Diego-based biotech firm Ambrx Biopharma is up 619% this year thanks to encouraging results in a phase 2 trial in China for a drug it’s developing to treat breast cancer. Here are the rest of the top 10 small-cap stock performers of 2023 so far.

Small Cap First Half Winners
NameSymbolMarket Value (mils)Sales (mils)2023 Return (%)
Bit DigitalBTBT$369$32627
Ambrx BiopharmaAMAM$889$7619
Cipher MiningCIFR$722$25418
Applied DigitalAPLD$742$41353
InnodataINOD$321$77277 HoldingsBBAI$356$161264
Olema PharmaceuticalsOLMA$393$0260
U.S. Xpress EnterprisesUSX$332$2,137239
Oscar HealthOSCR$1,821$4,461234
Eos Energy EnterprisesEOSE$640$24233
Source: Factset, data as of June 29

Small Cap First Half Losers

Market Value (mils)Sales (mils)2023 Return (%)
MSP RecoveryLIFW$1,129$22-79
Nutex HealthNUTX$302$269-76
BioXcel TherapeuticsBTAI$515$1-70
PacWest BancorpPACW$963$1,840-63
MYT NetherlandsMYTE$303$768-59
Source: Factset, data as of June 29

On the losing side, some names that were once darlings of Silicon Valley are now facing serious crises. No U.S.-listed small-cap stock has fared worse this year than WeWork, which is down 82%. Softbank poured billions into the company that manages shared office spaces, valuing it at $47 billion in January 2019 in the private markets. By the time the company finally went public via a SPAC merger in October 2021, its valuation was down to $9 billion, and it has endured a steady decline to $545 million since then.

CEO Sandeep Mathrani, who took over in 2020 after the ouster of founder Adam Neumann, abruptly stepped down on May 16 with no successor lined up, and CFO Andre Fernandez followed him out the door a week later. Trading at just 26 cents a share, WeWork received notice in April that it’s in danger of being delisted from the New York Stock Exchange if it does not regain compliance with the $1 minimum share price within a six-month period.

One of the other biggest losers is Chegg, which was one of the hottest stocks of 2020 as students taking remote classes flocked to the subscription service for its study help resources–and its trove of solutions to textbook problems to cheat on homework and tests. Its stock soared 138% that year as revenue grew 57% to $644 million.

But since then, as students have returned to taking tests in the classroom and regained access to in-person instruction from tutors and professors, its stock is down 92% from its February 2021 peak. Now, ChatGPT is presenting an existential–and free–threat to enterprising college students looking to cut corners on homework. CEO Dan Rosensweig said on its first-quarter earnings call that ChatGPT was having an impact on its new customer growth rate, an admission that sent the stock tumbling 48% in one day.

“They were the first publicly-held company to cite the negative impact of generative AI on their company,” says BMO analyst Jeff Silber. “The churn is so high in college that if you lose a couple of semesters of new students, it’s really going to be tough to get them back.”

Chegg is reacting by embracing artificial intelligence with a new product it’s developing called CheggMate, which aims to integrate Chegg’s content with OpenAI’s GPT-4 to create a more interactive experience for students. Analysts don’t expect it to be finished in time for the start of the fall semester, when a new class of college students will be looking for homework help, and they’re watching for any evidence of attrition in the meantime.

“On the first quarter call, Chegg’s management was adamant that the only area of weakness that they were seeing was really on net new subscribers coming in, and that retention remained very strong,” says Needham’s Ryan MacDonald. “If you start to see subscriber counts decline materially in the second quarter, then that’s a bigger concern.”

This article was first published on and all figures are in USD.

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