Small-cap stocks were broadly expected to benefit from deregulation and lower taxes under the Trump administration.

Both regulation and taxes tend to weigh more on the bottom-lines of smaller companies than they do on their larger counterparts. Still, small-cap stocks haven’t been able to do all that well in recent months.

However, things sure could change moving forward. According to Wolfe Research strategist Rob Ginsberg, the US small-cap stocks are strongly positioned for a significant rally ahead.

Why haven’t the small-cap stocks done well?

Investors have been wary of investing heavily in the US small-cap stocks primarily because it’s been ages since they succeeded in outperforming the large-cap names.  

In fact, large-cap stocks have done significantly better than the small-cap stocks index in nine of the past 11 years. Last year, for example, the Russell 2000 returned just 10% versus well over 20% for the S&P 500.

Nonetheless, there’s reason to believe that this Trump trade has been getting ready for a meaningful run to the upside that may materialize over the next quarter or so, according to Ginsberg.

What signals a big move to the upside in small-cap stocks?

It hasn’t been all that long when small-cap stocks were struggling to pull out of the read.

At writing, however, the Russell 2000 has all of its sectors in the green over the past month, and now “further gains looking likely,” as per the Wolfe Research strategist.   

“The index has carved out a compelling multiyear base after several years of choppy, range bound trading and struggles,” he added in a research note last week.

The small-cap index currently sits a little below a key resistance at the 2,450 level. A breakout could clear the path for “a massive run” in the group, Ginsberg argued in his report.

What interest rate cuts could mean for the Russell 2000

President Trump is broadly expected to favour policies that could lift the US economy in 2025. Some experts even see the GDP improving by as much as 5.0% this year.

That could also prove to be meaningful for small-cap companies as they drive a bigger chunk (up to 80%) of their revenue from the domestic market.  

Finally, small-cap stocks are worth buying as the Fed is expected to cut interest rates further in 2025.

Why? Because smaller companies often have higher levels of debt. A decline in borrowing costs, therefore, helps free up their capital for growth.

Small-cap firms also rely more on external financing, the cost of obtaining which reduced when interest rates are cut.

All in all, these companies are more nimble and have more room for rapid growth compared to their larger counterparts.

Lower borrowing costs allow them to capitalise on growth opportunities more easily.

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DeepSeek, a Chinese AI platform, has made headlines by surpassing OpenAI’s ChatGPT in downloads on Apple’s App Store in the US, according to The Spectator Index.

This milestone comes just a week after DeepSeek’s official launch of its new AI model.

While established players like OpenAI, Google, and Microsoft have long dominated the space, DeepSeek’s rapid ascent highlights the growing appetite for cost-efficient and high-performing AI solutions.

DeepSeek’s technology

DeepSeek R1, developed by the Hangzhou-based startup DeepSeek, is not just another large language model—it represents a significant advancement in reasoning and analytical capabilities.

The model employs a hybrid architecture combining reinforcement learning and chain-of-thought reasoning.

Two versions are available: DeepSeek-R1 and DeepSeek-R1-Zero, the latter featuring unsupervised fine-tuning for enhanced problem-solving capabilities.

Unlike its competitors, DeepSeek has focused on making AI accessible and adaptable.

In December, DeepSeek introduced a free, open-source large language model that was said to be created in just two months with a budget under $6 million.

The lab utilised Nvidia’s H800 chips, which are less powerful than the restricted H100 chips, the latter of which are subject to US export controls.

Compact versions of the R1 model are optimised for use on laptops and other devices, ensuring flexibility beyond high-powered servers.

This versatility could be pivotal in shaping adoption trends, particularly among small businesses and individual developers.

Why is DeepSeek growing

DeepSeek’s pricing model has been a game changer. While OpenAI charges $15 per million input tokens, DeepSeek R1 costs just $0.55—a staggering 96% difference.

Despite the lower price, the model has outperformed OpenAI’s GPT-4 in specific benchmarks, achieving a 97% success rate in coding tasks.

This balance between affordability and functionality has contributed to DeepSeek’s growing popularity.

On social media platforms, users have highlighted its superior performance in tasks like mathematical computations and coding.

Its seamless integration with smartphones has further boosted user interest, catering to the demand for mobile AI applications.

Along with performance, DeepSeek’s emphasis on accessibility has positioned it as a competitor to watch.

The model is available through a user-friendly chat interface and offers developer integration via the DeepSeek Developer Portal.

By simplifying access and providing cost-effective solutions, DeepSeek is carving out a unique niche in the AI market.

Implications for the global AI market

DeepSeek’s rise underscores the intensifying competition in the AI space, particularly as Chinese tech firms gain traction on a global scale.

Its success raises important questions about how US and European companies will respond to this challenge.

While companies like OpenAI have focused on scaling capabilities, DeepSeek’s strategy of combining affordability with strong performance has set a new standard.

The development also highlights the increasing demand for AI tools that cater to a diverse user base, from casual users to professional developers.

DeepSeek’s compact versions of the R1 model, designed for use on laptops and smaller devices, exemplify this shift.

The trend towards accessible, high-performance AI tools may force other companies to rethink their pricing models and product designs.

As competition intensifies, users stand to benefit from more sophisticated, cost-effective solutions. It remains to be seen whether DeepSeek can sustain its momentum and challenge established players in the long term.

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Transformers & Rectifiers India has emerged as a stock market marvel, delivering a jaw-dropping 11,725% return over the last five years.

From a modest ₹8 in 2018, the company’s shares have soared to ₹946, making it one of the most talked-about success stories in India’s industrial sector.

Investors who put ₹1 lakh into TRIL stock five years ago would now see their investment balloon to ₹1.18 crore.

The stock’s meteoric rise has not been a one-off rally. Over the past two years, TRIL shares have climbed 1,169%, jumping from ₹74.50 to ₹946.

The company’s ability to recover sharply from market corrections has made it a favourite among investors, with significant gains accruing after each dip.

TARIL’s performance fuelled by infrastructure boom

TRIL’s remarkable performance can be attributed to its growing order book, buoyed by India’s infrastructure push and the global uptick in energy projects.

The company, a major supplier of transformers to industries and utilities, has successfully capitalized on rising power demand and government capex plans.

The December-ended quarter saw TRIL securing new orders worth ₹631 crore, pushing its unexecuted order book to ₹3,686 crore.

The company also revealed ₹19,000 crore worth of inquiries under negotiation, signaling strong demand for its products in the coming quarters.

Revival in the transformer industry has further boosted TRIL’s fortunes.

With capacity expansions in power plants, large-scale renewable energy installations, and upgrades to transmission infrastructure, the sector has gained momentum after years of sluggish growth.

Diverse portfolio and specialised transformers expanding reach

TRIL’s diverse portfolio has played a key role in its expansion.

The company supplies transformers to power generation and distribution projects, railways, renewable energy plants, and industrial manufacturing units.

Beyond its stronghold in India, TRIL has expanded its presence internationally, exporting to markets across Asia, Africa, and the Middle East.

The company’s innovative approach to renewable energy has been particularly noteworthy.

With the growing adoption of renewable power sources, TRIL has developed specialized transformers to cater to this segment.

Its technical expertise and tailored solutions have helped it carve a niche in the rapidly evolving energy landscape.

The company is now aiming to increase export revenue contribution to 25% in two years.

Steady focus on operational efficiency

Alongside strong demand, TRIL has implemented strategies to streamline operations and enhance profitability.

The company is gradually moving toward full backward integration to reduce dependency on external suppliers for critical components.

This, combined with operational optimization and cost rationalization, has further strengthened its financial position.

By leveraging its technological advancements and tapping into emerging market opportunities, TRIL has demonstrated a formula for consistent growth in a competitive industry.

The company’s rise highlights the transformative impact of a clear strategy paired with strong market fundamentals.

TARIL share price outlook for 2025

Earlier in the month, analysts at Antique Broking and Nuvama maintained their “buy” rating on the stock.

Antique raised its price target on the stock from Rs 1,187 to Rs 1,424. The brokerage said that it expects the company to report exponential growth over the next three years, with revenue and PAT rising by 3.6x and 10x in FY27 from the base of FY24.

Nuvama also raised its 12-month target price to Rs 1,450 from Rs 980.

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Activist investor Ancora Holdings has acquired a stake in US Steel and is urging the steelmaker to abandon its merger agreement with Japan’s Nippon Steel, according to a Wall Street Journal report.

Ancora intends to encourage shareholders to remove US Steel’s CEO David Burritt, according to the report. The activist investor’s stake in US Steel is still unknown.

According to the WSJ, Ancora has nominated nine director candidates, including former Stelco chief Alan Kestenbaum, to the company’s 12-person board. Ancora is reportedly not interested in selling the American steelmaker to another party.

Bloomberg News reported that the hedge fund wants Kestenbaum to replace Burritt as CEO.

Nippon and US Steel deal

Earlier this month, former US President Joe Biden cited national security concerns to block Nippon Steel’s $14.9 billion acquisition of US Steel. The order also mandated that Nippon abandon the bid by June.

The Biden administration is being sued by the companies for preventing the acquisition.

Nippon Steel’s potential acquisition of US Steel was also opposed by the US President Donald Trump.

In December, Donald Trump expressed his strong opposition to the specific deal on a social media platform, stating resolutely, “I will block this deal from happening.” 

This declaration highlights Trump’s intent to use his influence and authority to prevent the deal from reaching completion.

Other firms interested in US Steel

Earlier in January, Reuters reported that Cleveland-Cliffs, a competitor in the steel industry, was collaborating with another steelmaker, Nucor, to explore a potential all-cash offer to acquire US Steel. 

This development suggests that US Steel may be a target for acquisition, with Cleveland-Cliffs and Nucor potentially emerging as key players in a potential bidding war.

Cliffs Natural Resources Inc. had previously expressed interest in acquiring US Steel Corporation, but the proposed deal was met with resistance from the company. 

Antitrust concerns

The American steelmaker cited concerns over potential antitrust issues that could arise from the merger, as well as the impact on the US automotive industry due to the consolidation of steel supply.

A merger between the two companies could potentially lead to a scenario where up to 95% of US iron ore production would be controlled by a single entity. 

This level of consolidation raises significant antitrust concerns, as it could grant the merged company substantial market power and the ability to influence prices and supply. 

Additionally, US automakers, who rely heavily on domestic steel supply, expressed apprehension about the potential for reduced competition and increased costs that could result from the merger.

Ancora Holdings, known for its activist investor strategies, has previously targeted and pushed for changes within several other companies. 

These include prominent names in the transportation and logistics sector, such as C.H. Robinson, a global provider of multimodal transportation services and logistics solutions. 

Other companies include Norfolk Southern, a Class I freight railroad company operating in the eastern United States; and Forward Air Corporation, a freight and logistics company specializing in expedited less-than-truckload shipping.

Ancora’s involvement in these companies typically involves advocating for strategic shifts, operational improvements, or changes in corporate governance, often with the goal of enhancing shareholder value.

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Atlassian stock price held steady and is up for two consecutive weeks as focus turns to its upcoming financial results. TEAM shares jumped to a high of $265 on Friday, up by almost 100% from its lowest point in 2024. So, is Atlassian a good investment ahead of earnings?

Atlassian earnings ahead

Atlassian, the parent company of Jira, Confluence, Loom, and Trello, is one of the most popular software companies globally. It has also grown to become the sixth biggest company in Australia after Commonwealth Bank, BHP, CSL, National Australian Bank, and Westpac. 

The company’s business has done well over time as more large and SME companies embraced its technology. Its annual revenue grew from $1.6 billion in 2020 to over $4.3 billion in the last financial year. 

This growth happened as more companies embraced its communication, collaboration, and project management solutions. Some of its top clients are companies like Mercedes-Benz, Dropbox, Lumen, and Royal Carribean. 

The next key catalyst for the Atlassian stock price will be the upcoming earnings, scheduled for January 30. Analysts expect these numbers to show that the company’s business continued to perform well in the last quarter. 

The average revenue estimate is $1.24 billion, up about 17% from the same quarter in 2023. This is impressive for a technology company established in 2002.

The company’s guidance is that its revenue will be $1.32 billion in the next quarter, while its annual revenue will be $5.12 billion. It will hit $6.13 billion in the next financial year, a strong performance. 

Read more: Atlassian’s stock upgraded by Piper Sandler to Overweight: Buy opportunity?

TEAM earnings growth and valuation

The most recent results showed that Atlassian’s revenue rose from $977 million in the first quarter of 2023 to $1.18 billion. Its gross margin eased slightly from 81.8% to 81.7%, while its net loss jumped to $123 million. 

The company also announced that it will continue to repurchase its stock. After completing its $1 billion repurchase, it initiated a $1.5 billion share repurchase program. It hopes that these repurchases will help to reduce the outstanding share count and boost its earnings per share. 

A key concern has always been that Atlassian’s business is highly overvalued since it has a market cap of over $68 billion. This figure means that its forward P/E ratio of 80.8, higher than the industry average of 26. It is also higher than other companies like NVIDIA and Microsoft. 

TEAM is a SaaS company, meaning that rule of 40 is an ideal approach to value it. The rule-of-40 approach looks at a company’s growth and adds with its margins. It has a revenue growth of 20.14% and a net income margin of minus 9, giving it a figure of about 11. On the positive side, using the free cash flow margin of 32 gives it a rule of 40 figure of 52. 

Atlassian stock price 

The weekly chart shows that the TEAM stock price formed a slanted double-bottom pattern whose neckline was at $257. This highly popular pattern often leads to more gains over time.

The stock has moved above the key resistance point at $257, the highest swing in January 27 and slightly above the 38.2% Fibonacci Retracement level.

Most importantly, it has formed a golden cross pattern as the 50-week and 200-week moving averages flipped each other. The stock has also formed a bullish pennant chart pattern. 

Therefore, the stock’s outlook is bullish. The initial target is $287.35, which was its highest swing on December 2. It will then jump to the 50% retracement point at $300.

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