Morningstar US Micro Cap Index Jumps 45.7%, Beating Broad Market as AI and Biotech Fuel Rally
Updated
Updated · Morningstar · Aug 24
Morningstar US Micro Cap Index Jumps 45.7%, Beating Broad Market as AI and Biotech Fuel Rally
3 articles · Updated · Morningstar · Aug 24
Summary
45.7% trailing-year gains through Aug. 17 lifted the Morningstar US Micro Cap Index far ahead of the Morningstar US Market Index’s 22.8%, extending micro-caps’ outperformance over large-, mid- and small-cap benchmarks.
AI enthusiasm and spending drove much of the surge, with fiber-optics, chip-material and former crypto-miner-turned-data-center stocks helping the iShares Micro-Cap ETF beat the small-cap market; medical-treatment hopes also sent Praxis Precision Medicines sharply higher.
33% average returns for small-cap funds with 51% to 100% in micro-caps topped the roughly 26% gain for funds with less than 19.6% exposure, and similar results appeared when funds were grouped by average market capitalization.
18%-plus tech weightings and heavier exposure to lower-quality companies produced stronger category rankings among micro-cap-heavy funds, underscoring that much of the rally has come from more speculative names.
Slightly positive flows over the past year suggest investors are noticing, but Morningstar said many tiny stocks still face the same valuation and AI-spending sustainability risks as larger peers.