Small caps have quietly reversed course after years of underperformance, defying classic investing wisdom. Once seen as high-risk, high-reward plays, they’ve lagged behind large caps due to weaker profitability, higher debt burdens, and market shifts toward mega-cap tech. But now, with AI benefits trickling down and valuations at multi-year lows, the tide may be turning. Analysts project stronger earnings growth for small caps—potentially outpacing the S&P 500—and their recent 8% gain hints at a market rotation underway. Could this be the comeback moment for overlooked small-cap stocks?

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