In April alone, the index surged 15.3%, highlighting how demand for artificial intelligence stocks and cloud infrastructure continues to accelerate. Investors are increasingly betting that AI is not just a trend but a long-term growth driver across the tech sector.

That momentum is showing up clearly in earnings season, where several of the biggest names in tech are delivering results that validate the bullish narrative.

Apple Posted Strong Results and Raised Its Dividend

Apple (NASDAQ: AAPL) beat estimates. The company reported earnings per share of $2.01, beating estimates by seven cents. Revenue reached $111.18 billion, a 16.5% year-over-year increase and coming in $1.6 billion ahead of forecasts. Beyond the headline numbers, the company announced a quarterly dividend of $0.27 per share—payable May 14 to shareholders of record as of May 11.

It also authorized a massive $100 billion share buyback program. Wall Street quickly took notice, with Morgan Stanley noting that the results helped ease investor concerns around cost pressures while reinforcing confidence in Apple’s growth trajectory. Many analysts now believe the report could act as a catalyst for continued stock outperformance heading into the next iPhone launch cycle.

Analysts at Citigroup, Bank of America, JPMorgan Chase, and Goldman Sachs all reiterated bullish ratings, with targets ranging from $315 to $340.

However, Apple wasn’t the only tech giant that posted solid earnings this season.

Microsoft Continues to Dominate in Cloud and AI

Microsoft (NASDAQ: MSFT) also delivered a powerful earnings report, reinforcing its leadership position in both cloud computing and artificial intelligence. The company posted earnings per share of $4.27, beating expectations by 22 cents. Revenue climbed to $82.89 billion, up 18.3% year over year and above analyst forecasts.

The standout, once again, was Azure, Microsoft’s cloud platform, which saw revenue surge 40% year over year. That growth highlights the accelerating demand for cloud infrastructure needed to support AI applications, data processing, and enterprise digital transformation.

Reddit is Surging on Solid Earnings

Shares of Reddit (NYSE: RDDT) are on the run following strong earnings. EPS of $1.01 was far better than the expected 58 cents. Revenue of $663 million was also above expectations of $611 million. 

Reddit said second-quarter sales should be in the range of $715 million to $725 million, ahead of analyst estimates of $712 million. Adjusted earnings will be between $285 million and $295 million, which also beats the $276 million average estimate.

Meta Failed to Impress, Especially with Guidance

Granted, Meta Platforms (NASDAQ: META) EPS of $10.44 beat by $3.78. Revenue of 56.31 billion, up 33.1% year over year, beat by $760 million. 

Unfortunately, Meta spooked investors with an increase in capex and guidance. With guidance, despite a more than 33% increase in revenue for the first quarter, Meta Platforms expects Q2 revenue to be within a range of $58 billion to $61 billion. A midpoint of $59.5 billion would be in line with expectations. The company also expects to spend $125 billion to $145 billion in capital expenditures, up from the prior range of $115 billion to $135 billion.

AI Stock Rally Still Has Room to Run

This earnings season reinforces a central theme in today’s market: the AI stock rally is real and continues to drive outsized gains in tech stocks. Strong results from companies like Apple and Microsoft show that AI is already translating into revenue growth, while others like Meta highlight the massive investment required to stay competitive.

For investors, the opportunity remains compelling—but it’s becoming more nuanced. Not every company will benefit equally from the AI boom, and rising capital expenditures could pressure margins in the near term. That makes selectivity critical.

The bigger picture, however, hasn’t changed. As artificial intelligence adoption expands across industries, the foundation for long-term growth in artificial intelligence stocks remains firmly in place.

This surge is being fueled by a combination of improving earnings expectations, the prospect of additional interest rate cuts, and ongoing signs of strength in the U.S. economy.

Small-cap stocks are particularly sensitive to shifts in economic conditions and Federal Reserve policy. As CNBC recently noted, these companies tend to generate more of their revenue domestically, making them more responsive to U.S. growth trends.

History also favors small-cap stocks in easing-rate environments. Because many smaller companies rely more heavily on debt financing, lower interest rates can significantly reduce borrowing costs and improve access to capital. That dynamic can translate into stronger balance sheets and improved profitability. For these reasons, many investors view small-cap stocks as among the biggest potential beneficiaries of future rate cuts.

The Other Side of Small-Cap Stocks

However, if you like to pick your own stocks, that becomes more challenging with small-cap stocks. Many of these stocks are penny stocks, which means they trade at or below $5. Some even trade below $1 (literally penny stocks).

The ability to accumulate a substantial amount of shares at a low price can be appealing. Particularly, if you believe the share price will go much higher. However, many of these stocks are low-priced because they have very little revenue and are not profitable.

That can make owning these stocks more like gambling or buying a lottery ticket. Great if they work out, not so great if they don’t.

Also, many small-cap stocks have very little analyst coverage and little institutional ownership. That means these stocks can be too volatile for risk-averse investors.

Small-Cap ETFs Can Help Manage Risk

A simple way to manage the risk and volatility of small-cap stocks is by owning exchange-traded funds (ETFs). These funds hold a basket of stocks that track specific indexes.

Investors get exposure to dozens of stocks within the fund, and the holdings are balanced on a quarterly basis, so investors don’t have concerns about timing the market.

With that backdrop in mind, here are three small-cap ETFs worth considering.

Vanguard Small-Cap ETF (VB)

The Vanguard Small-Cap ETF (NYSEARCA: VB) tracks the CRSP U.S. Small Cap Index and holds 1,336 stocks. The fund’s holdings include SoFi Technologies (NASDAQ: SOFI), NRG Energy (NYSE: NRG), Atmos Energy (NYSE: ATO), Reddit Inc. (NYSE: RDDT), and Pure Storage (NYSE: PSTG).

One of the most attractive features of the fund is its low expense ratio of just 0.05%. VB also pays a quarterly dividend. Most recently, it distributed just over $0.92 per share on Dec. 24, 2025, following a payout of more than $0.80 on Oct. 1, 2025.

iShares Russell 2000 ETF (IWM)

The iShares Russell 2000 ETF (NYSEARCA: IWM) offers direct exposure to U.S. small-cap companies. The fund tracks the Russell 2000 Index and has a low expense ratio of 0.19%. The fund holds 1,965 stocks, including Credo Technology (NASDAQ: CRDO), Bloom Energy (NYSE: BE), IonQ Inc. (NYSE: IONQ), Fabrinet (NYSE: FN), and Rambus (NASDAQ: RMBS).

IWM also pays a quarterly dividend, with its most recent payment exceeding $0.84 per share on Dec. 19, 2025. Prior to that, it paid just over $0.67 on Sept. 19. 2025.

Scwab U.S. Small-Cap ETF (SCHA)

With one of the lowest expense ratios in the category at 0.04%, the Schwab U.S. Small-Cap ETF (NYSEARCA: SCHA) tracks the Dow Jones U.S. Small-Cap Total Stock Market Index. The fund holds 1,687 stocks, including Reddit, Credo Technology, Affirm Holdings (NASDAQ: AFRM), Bloom Energy, and IonQ Inc.

The Last Word on Investing in Small-Cap Stocks

With the Russell 2000 at record highs and monetary policy potentially turning more accommodative, small-cap stocks appear well-positioned to benefit from a favorable economic backdrop.

Improving earnings expectations, easing financial conditions, and strong domestic exposure all support the case for continued momentum in the space. For investors looking to gain diversified exposure while keeping costs low, ETFs like VB, IWM, and SCHA offer efficient ways to participate in a potential small-cap tailwind as rate cuts move closer into view.