A Top Small-Cap AI Stock to Buy Now and Into 2026

Small-cap stocks are those with market capitalizations ranging from $300 million to $2 billion. These stocks, as a group, should be viewed as higher-risk/potentially high-reward investments.

Some of them will likely turn out to be huge long-term winners. After all, many great-performing large-cap stocks started as small caps. Nvidia stock was a small-cap stock just over 20 years ago, and now the company is the leading maker of artificial intelligence (AI) chips, boasting a market cap that's the largest on the S&P 500 index at a whopping $4.2 trillion.

Small caps have powerful growth potential because it's easier for smaller companies to grow earnings faster on a percentage basis than it is for larger companies -- and percentage earnings growth essentially drives stock-price performance.

However, the stocks of smaller companies tend to be riskier and volatile. Only investors with higher risk tolerances should consider investing in small caps.

Here is a small-cap stock that I believe has the potential to remain a long-term winner and grow into a large cap: Preformed Line Products (NASDAQ: PLPC).

This company is profitable, which isn't all that common in the small-cap space. Moreover, it also pays a modest dividend, which is relatively rare among small caps.

Image source: Preformed Line Products.

Preformed Line Products: A top small-cap stock to consider buying for 2026

Data sources: Yahoo! Finance and YCharts. P/E = price to earnings. EPS = earnings per share. Data to Dec. 18, 2025.

AI-driven electric grid upgrades and global expansion are growth drivers

Preformed Line Products, founded in 1947, describes itself as a "designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for energy, communications, and broadband network companies." It's a global company with locations in 20 countries.

The Ohio-based company's customers include power utilities, telecommunications network operators, cable television and broadband service providers, as well as construction contractors.

Preformed Line Products should receive a long-term boost from the increasing adoption of AI worldwide. The electric grids in the United States and other countries must be significantly upgraded and expanded to support the growing power demand related to AI. That said, it's a positive in my mind that PLPC's products and services cater to several industries and end uses, and that the company is not a pure play on AI or the electric grid.

Significant insider ownership and involvement of the family of the founder in running the business

One of the main factors I like about this stock is that the same family has been actively involved in running the company since its founding 88 years ago by engineer Thomas Peterson. Robert Ruhlman is the executive chairman, having transitioned from CEO in early 2024. His son, J. Ryan Ruhlman -- who is the great-grandson of the founder -- is president and a board member.

The Ruhlman family has a significant stake in the stock -- so its interests are aligned with those of shareholders. Insiders own from about 31% to 48% of shares outstanding. (Data varies by source, with reputable sources having different percentages.) Nevertheless, this entire range represents a significantly higher insider ownership percentage than investors typically find in the vast majority of stocks.

PLPC stock will likely be somewhat volatile in the short term, along with other stocks connected to AI. But the Ruhlman family is obviously running this business with long-term performance in mind. As such, it's a good stock for long-term investors.

Solid financials

In the third quarter, Preformed Line Products' revenue increased 21% year over year to $178.1 million. Growth in the United States was driven by strong performances in both the energy and communications end markets. The international segments also grew, driven by higher energy product sales as well as incremental communication market sales from the company's recently acquired JAP Telecom.

In May, the company acquired JAP Telecom, a Brazilian designer and manufacturer of connectivity solutions for the South American telecommunications infrastructure market. At that time, CEO Dennis McKenna (no relation to me) said, "Not only does this strategic acquisition expand our communications product offering, it also enhances our ability to serve the unique infrastructure needs of customers across South America and the globe."

In Q3, Preformed Line Products' net income adjusted for one-time items was $10.3 million, or $2.09 per share, up 36% year over year. The adjusted earnings per share (EPS) growing faster than revenue indicates an expanding profit margin.

The company has robust cash flows, another factor that I particularly like. Cash generated from operations was $18.9 million, up 102% year over year. Free cash flow (FCF) was $8.5 million, a solid result especially considering PLPC is using cash to build a new, larger, and more modern facility in Poland. The company ended the quarter with cash and equivalents of $72.9 million and long-term debt of $31.3 million.

Speaking of the new facility being built in Poland, it's only roughly 215 miles by highway to the border with Ukraine. Once the Russian-Ukrainian war ends, Ukraine's critical infrastructure will need significant rebuilding. This includes energy and communications infrastructure, which are PLPC's core end markets. This is just my speculation, but it seems reasonable to predict that the company could get some of this rebuilding work.

Preformed Line Products' current dividend yield is about 0.39%. While this is modest, even a modest dividend can make a big difference in an investor's return over the long term when it is reinvested.

In the earnings release, Executive Chairman Robert Ruhlman shared good news on the subject of tariffs:

Earlier this year, we announced selling price increases designed to mitigate the impact of the recently enacted tariffs. While these selling price increases currently lag the flow through of higher costs associated with tariffs in our income statement, over time, full mitigation is expected. [Emphasis mine.]

Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.