Barron’s: AI Could Help Small-Caps Outpace Megacap Rivals

what happened

Barron’s reports that small-cap stocks may benefit from expectations of eventual interest-rate relief and broader market leadership. These companies generally generate a larger share of revenue domestically, which could help if U.S. economic growth stabilizes or accelerates. The iShares Russell 2000 ETF (IWM) typically holds companies with market capitalizations of $300 million-$2 billion.

Smaller teams may be able to adopt artificial-intelligence tools more quickly, automate workflows and increase capacity without adding staff at the same rate. For larger enterprises, AI-related savings can be partly offset by severance, retraining and the cost of managing thousands of employees. Over the past three months, IWM has fallen 6%, while the Nasdaq and S&P 500 have gained 4% and 3%, respectively.

On IWM’s daily chart, a bullish MACD crossover below the zero line appeared in early October. The fund has returned to its 200-day simple moving average, while last Thursday’s bullish hammer marked a technical support area. The article presents a possible move to $335 by mid-2027, equivalent to a 20% gain from current prices; IWM was trading around $278 on Monday. Barron’s identifies $274 as the level above which its view remains bullish.

The monthly chart shows IWM sharply underperforming the S&P 500 since the start of 2021 and standing 9% below its 52-week high. Nevertheless, the fund has risen in 14 of the last 17 months and has not posted back-to-back monthly losses since April 2025. The report says the breakout above $245 last October remains intact. A break below $274 could expose a retest near $250. The article was written by Doug Busch, senior technical analyst at Barron’s Investor Circle.

why it matters

The report presents Barron’s technical analysis rather than investment advice from Newsmetry. A broader shift in market leadership could affect small-cap ETFs and IWM’s relative performance versus the S&P 500.

instruments