Debt generally has a negative connotation – it could be a burden on individuals, a government, or, in the case in discussion, an organisation. So, why do companies still accumulate debt? There are several reasons, but the primary reasons are – the cost of debt is cheaper than other financing options such as equity, debt doesn’t lead to ownership in the company and doesn’t dilute the owners’ equity position in the business, and debt is cost-effective because interest on debt is tax-deductible. Debt can be used to fund expansion or operations, or even to pay down previous debt. It can also be used to invest in research and development without giving up control.
On the other hand, debt has a fixed cost and interest rate, representing a significant potential threat to the company’s operations and, in severe cases, its existence. Lenders can foreclose if interest and principal are not paid as agreed, possibly requiring the business to cease operations and liquidate its assets. From a small cap stock’s perspective, this angle becomes much more important due to the usual volatility in their business and the relatively higher interest rates they are charged because they are smaller in scale.
While increasing debt is risky, harsh macroeconomic conditions make it further challenging. In an interview with CNBC on March 12, Bridgewater Associates founder Ray Dalio highlighted a growing supply-demand imbalance in the U.S. debt market. He highlighted that although some investors remain optimistic due to past resilience, the current situation is structurally different. He explained that the volume of debt the U.S. will need to issue may exceed demand from global investors thus creating a near-term risk. Dalio believes the fiscal deficit must be significantly reduced to address this imbalance, from the current projected 7.2% of GDP to approximately 3%. Without such adjustment, the U.S. could face difficult decisions, including debt restructuring, political pressure on foreign creditors, debt monetisation, etc.
With this challenging backdrop and rising bankruptcies, investing in financially stable companies becomes crucial, especially in the case of volatile stocks. CNBC recently reported that corporate bankruptcies in the U.S. have surged to their highest growth rate since the aftermath of the Great Recession, surpassing even the levels seen during the COVID-19 pandemic. In 2024, 694 companies filed for bankruptcy, up from 635 in 2023 and even above 638 in the pandemic year 2020. During the discussion, the CNBC panellist explained that the main reason for this trend is the continued increase in interest rates, which has made it much more expensive for companies to manage their debt.
Interest rates might remain elevated for a longer period, and thus investing in debt-free, affordable stocks may be the right decision in these volatile times. Although small cap stocks are risky, identifying fundamentally strong companies with low or no debt can allow investors to capitalise on their growth opportunities without the added risks of debt.
With these insights, let’s explore our selection of the best debt-free IT stocks to buy under $10.
Our Methodology
We used online screeners to compile a list of IT stocks with a stock price below $10 and a market capitalisation of at least $300 million. For the shortlisted stocks, we compared their enterprise value (EV) to their market capitalisation (EV to Market cap ratio). A ratio below 1.0 would mean that the company doesn’t have any debt or has minimal net debt. We then identified the top 10 stocks with the highest hedge fund ownership from this refined list by leveraging data from Insider Monkey’s Q4 2024 hedge fund database. Finally, we ranked these stocks in ascending order based on the number of hedge funds holding positions in them.
Note: All pricing data is as of market close on March 27.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Debt-Free IT Stocks to Buy Under $10
10. Rigetti Computing Inc. (NASDAQ:RGTI)
Ent. Value: $2.4 billion; Market Cap: $2.6 billion
EV to Market Cap: 0.9
Share Price: $8.47
Number of Hedge Fund Holders: 17
Rigetti Computing Inc. (NASDAQ:RGTI) is a quantum computing company which provides full-stack quantum computing solutions. It manufactures quantum chips which allow businesses and researchers to leverage quantum technology for practical applications.
The investment thesis for quantum computing (QC) is that companies in this space will eventually transition from research and development to large-scale commercial production. Since its founding in 2013, Rigetti Computing Inc. (NASDAQ:RGTI) has deployed 17 quantum systems and still looking at increasing scale. Before 2030, QC providers’ estimated annual market value is between $1 billion and $2 billion, primarily driven by public sector demand, including government labs. However, this market is projected to expand significantly, reaching between $15 billion and $30 billion annually between 2030-2040.
After surging 1,500% in 2024, Rigetti’s stock has experienced volatility in 2025, similar to its peers. Many stocks across the QC industry dropped after Nvidia’s CEO stated that quantum computers were still at least 20 years away. While he later retracted his statement, market volatility has continued in the following weeks.
Despite short-term noise, Rigetti remains focused on its long-term objectives. The company recently announced a strategic collaboration with Quanta Computer. Both firms will invest over $100 million each over the next five years to advance superconducting quantum computing technologies. This partnership accelerates product development and strengthens Rigetti’s competitive position.
Looking ahead, Rigetti Computing Inc. (NASDAQ:RGTI) continues to be a consensus buy with a positive outlook. The stock has a 1-year median price target of $15, representing a potential upside of 65%.
9. nLight Inc. (NASDAQ:LASR)
Ent. Value: $326 million; Market Cap: $414 million
EV to Market Cap: 0.8
Share Price: $8.27
Number of Hedge Fund Holders: 24
nLight Inc. (NASDAQ:LASR) provides advanced laser solutions which are used in industrial, microfabrication, and aerospace and defense applications. Its high-performance semiconductor lasers and fiber lasers are critical in various applications, including material processing, medical devices, and defense systems.
In late February, Needham analyst James Ricchiuti reiterated a Buy rating on nLIGHT (NASDAQ:LASR) with a price target of $14. The analyst expressed confidence in the company’s long-term potential. While the analyst expressed caution for the near-term outlook, particularly for the commercial segment, he sees strong growth prospects in the defense business. According to him, this business is expected to grow by 25% in 2025, driven by a strong 55% increase in backlog during 2024. However, the analyst also points out that the commercial segment is likely to see a drop in revenue over the next two years. Despite these hurdles, he views nLIGHT as having a favorable risk-reward balance, with its focus on the defense sector being a key factor for future growth.
Around the same time, Ruben Roy from Stifel Nicolaus also reaffirmed a Buy rating on the shares with a price target of $14.
8. Xperi Inc. (NYSE:XPER)
Ent. Value: $313 million; Market Cap: $359 million
EV to Market Cap: 0.9
Share Price: $8.21
Number of Hedge Fund Holders: 24
Xperi Inc. (NYSE:XPER) is a technology company specializing in audio, imaging, and semiconductor solutions. It provides IP licensing for semiconductor and entertainment applications and has brands like DTS, IMAX Enhanced, and TiVo under its umbrella.
BWS Financial analyst Hamed Khorsand expects Xperi Inc. (NYSE:XPER)’s rising active user base from Q4 2024 to drive monetization and revenue growth in 2025. He sees further upside from media expansion through TV OS and IPTV partnerships which could boost users and revenue by 2026. Xperi’s financials remain strong, with revenue and adjusted net income exceeding estimates. Its EV/EBITDA multiple of 4.6x, alongside projected 10%+ revenue growth and 30%+ EBITDA growth by 2026, makes it an attractive investment. As a result, Khorsand reaffirmed a Buy rating with a $30 price target.
7. Sprinklr Inc. (NYSE:CXM)
Ent. Value: $1.8 billion; Market Cap: $2.3 billion
EV to Market Cap: 0.8
Share Price: $8.76
Number of Hedge Fund Holders: 25
Sprinklr Inc. (NYSE:CXM) provides customer experience management (CXM) solutions using an AI-powered unified-CXM platform for businesses which enables them to handle customer interactions across various channels, including social media, messaging, and email. The platform integrates data analytics, artificial intelligence, and machine learning to enhance customer engagement, streamline marketing efforts, and improve overall brand experience.
Sprinklr Inc. (NYSE:CXM) is on track to improve its profitability in the coming years as it is focusing on driving sustainable and efficient growth. The company is also making progress toward meeting the ‘Rule of 40,’ a key benchmark in the software industry. Management anticipates that FY 2026 (FY ending January) will be a transition year as the company streamlines expenses, refines its go-to-market (GTM) strategy, enhances product innovation, and streamlines capital deployment. It had also recently announced 15% reduction in workforce.
The company’s FY 2025 revenue grew by a healthy 9% year-over-year to $796.4 million, of which subscription revenue contributed around $718 million, at a 7% YoY growth. For FY 2026, the firm is expecting to post $823 million in revenue, at slightly over 3% YoY growth. That said, after a decline in 2025, it is expecting EPS to grow 10% to $0.39.
Noticeably, at the end of Q4, the company had around $484 million in cash on its balance sheet with no debt outstanding.
6. Vimeo Inc. (NASDAQ:VMEO)
Ent. Value: $587 million; Market Cap: $900 million
EV to Market Cap: 0.7
Share Price: $5.48
Number of Hedge Fund Holders: 27
Vimeo Inc. (NASDAQ:VMEO) is a video software and streaming platform that provides tools for businesses, content creators, and enterprises. With its tools, the customers can produce, host and distribute video content. The company offers a range of services, including video hosting, live streaming, and video monetisation solutions, catering to a diverse clientele from individual creators to large enterprises.
While Vimeo Inc. (NASDAQ:VMEO)’s revenue was broadly flat year-over-year at $417 million, it continued to report robust bookings growth. For Q4, revenue fell 2% to $103 million, but bookings grew 3%. After the results, the management was quite upbeat about the strategic growth investments in product enhancements that capitalize on the market opportunities.
To do that, the company is currently focusing on innovations in vertical solutions, bolstering security for its content, offering new video formats like spatial video, and AI-led enhancements for its platform. Regarding guidance, the company expects growth acceleration in bookings and revenue, and is aiming to potentially achieve double-digit growth by the end of the year. Vimeo Inc. (NASDAQ:VMEO) ended 2024 with $325 million in cash and no debt.
5. Semrush Holdings Inc. (NYSE:SEMR)
Ent. Value: $1.2 billion; Market Cap: $1.5 billion
EV to Market Cap: 0.8
Share Price: $9.85
Number of Hedge Fund Holders: 27
Semrush Holdings Inc. (NYSE:SEMR) offers a digital marketing software platform that helps businesses enhance their online presence (services commonly known as SEO (Search Engine Optimization)). The platform enables companies worldwide to identify and engage with the target audience through the right channels.
While the company reported robust overall growth in Q4 2024 (results announced around end-February), guidance came in a tad bit lower than consensus. However, consensus opinion on the stocks remained largely positive. In early March, Jefferies analyst Surinder Thind reaffirmed a Buy rating on SEMrush Holdings Inc. (NYSE: SEMR) with a $16 price target. Despite a slight reduction in the 2025 revenue forecast, the analyst sees strong growth in the company’s platform strategy particularly among enterprise clients, which helps balance higher churn among smaller customers.
The analyst also notes that with an EV/Revenue multiple of 2.9x, SEMrush is trading at a substantially lower valuation, creating an appealing risk/reward opportunity. The company is also expanding its SEO Enterprise platform to attract more enterprise clients and is investing in AI enhancements to strengthen its offerings. Despite the concerns over its revenue guidance and leadership changes, the analyst believes that the long-term outlook is supported by company’s continued focus on scaling, execution, and increasing annual recurring revenue (ARR).
4. Aurora Innovation Inc. (NASDAQ:AUR)
Ent. Value: $11.3 billion; Market Cap: $12.4 billion
EV to Market Cap: 0.9
Share Price: $7.46
Number of Hedge Fund Holders: 27
Aurora Innovation Inc. (NASDAQ:AUR) is a technology company which focusses on developing autonomous vehicle solutions for freight and passenger transportation. The company is building the Aurora Driver, an AI-powered system for self-driving trucks and cars. The system consists of sensors, software, and hardware, and can be installed in passenger or commercial vehicles to convert them into self-driving cars.
The company partners with leading automotive and logistics companies to advance the adoption of self-driving technology in commercial fleets. While Aurora Innovation Inc. (NASDAQ:AUR) is a development-stage company and has not reported revenue so far, its upcoming commercial launch of Aurora Driver systems on the Dallas-Houston route in April 2025 is a much-awaited catalyst. The company is focusing on trucking, which is a massive market with a $1.0 trillion long-term opportunity.
As of the end of Q4 2024, the company had $1.24 billion in cash on its balance sheet, which was expected to support the planned commercial launch and its operations into the second half of 2026.
In early March, a Morgan Stanley analyst initiated the coverage on Aurora Innovation Inc. (NASDAQ: AUR) with an Overweight rating and a price target of $12. The analyst sees Aurora at a critical moment with commercial driverless revenue set to begin soon, positioning the company as a leader in the autonomous vehicle (AV) revolution. He views autonomous trucking as a major long-term earnings opportunity and believes Aurora is in a strong position to capitalise on it.
Although Aurora has been public for four years, the analyst believes the market is now recognising its leadership in the AV space, with its stock tripling in the last nine months. However, he suggests this could be just the beginning if the company’s long-term growth trajectory plays out as expected.
3. Harmonic Inc. (NASDAQ:HLIT)
Ent. Value: $1.2 billion; Market Cap: $1.2 billion
EV to Market Cap: 1.0
Share Price: $9.77
Number of Hedge Fund Holders: 27
Harmonic Inc. (NASDAQ:HLIT) is a communications equipment company which provides video delivery and broadband access solutions for media companies and network operators. The company’s cloud-based software and edge computing technologies enable high-quality video streaming, live broadcasting, and broadband network optimisation. While the company reported strong results, analysts viewed its guidance for the next financial year as weaker.
Following the quarterly results, a Needham analyst lowered the price target on Harmonic Inc. (NASDAQ:HLIT) to $14 from $18 and maintained a Buy rating on the shares, in a report on February 11. As per the analyst, the company delivered a very strong Q4 with revenue up 33%, but introduced a weaker FY25 guide than feared, driven by soft demand from its two major customers, i.e. Comcast Corp. (NASDAQ:CMCSA) and Charter Communications Inc. (NASDAQ:CHTR). The analyst added, however, that the Comcast transition to DOCSIS 4.0 Unified (D4U) is seen improving Harmonic’s strong competitive market position, with few competitive threats for the company.
2. Olo Inc. (NYSE:OLO)
Ent. Value: $721 million; Market Cap: $1.07 billion
EV to Market Cap: 0.7
Share Price: $6.42
Number of Hedge Fund Holders: 30
Olo Inc. (NYSE:OLO) provides an enterprise-grade, open SaaS platform to help restaurants with online ordering and delivery. Its cloud-based platform allows restaurants to handle orders, manage deliveries, and improve how they connect with customers. The software integrates with a range of restaurant technology solutions like point-of-sale (POS) systems, delivery service providers, and payment processors. Its software makes operations more efficient for restaurant businesses. The company serves various restaurant chains, including Shake Shack and Wingstop.
2024 was a strong year for the company from operations perspective as it reported over $29 billion in gross merchandise volume and more than doubled its gross payment volume to $2.8 billion, up from $1 billion in 2023. It released 13 product enhancements in its latest version of platform, including AI-powered menu item recommendations, and Sparkfly and Spendgo loyalty partner integrations. It was also able to increase its average revenue per user (ARPU) which helped Q4 revenue to grow 21% year-over-year to $76.1 million.
Looking ahead, the company gave an optimistic guidance for 2025, with revenue expected to be between $333-$336 million, and adjusted operating income between $45.5-$47 million. On a slightly negative side, due to revenue mix shift towards Olo pay services, gross margins are expected to compress by around 250 basis points versus those in 2024. However, some of this pressure will be offset by better operating leverage.
1. AvidXchange Holdings Inc. (NASDAQ:AVDX)
Ent. Value: $1.4 billion; Market Cap: $1.8 billion
EV to Market Cap: 0.8
Share Price: $8.55
Number of Hedge Fund Holders: 34
AvidXchange Holdings Inc. (NASDAQ:AVDX) is a software-as-a-Service (SaaS) based company that provides cloud-based accounts payable (AP) automation and payment solutions tailored for mid-sized businesses. Its platform helps clients across industries such as real estate, construction, and financial services streamline invoice processing and electronic payments, leading to lower costs and greater efficiency.
On March 14, Bloomberg reported that AvidXchange Holdings Inc. (NASDAQ:AVDX) is considering a potential sale after attracting takeover interest, even from private equity firms. The company has hired Financial Technology Partners to assess its options. However, discussions are still in progress, and the company may or may not decide to go ahead with the deal, especially given recent market volatility.
AvidXchange Holdings Inc. (NASDAQ:AVDX)’s stock was up nearly 14% as the market reacted positively to the news. Following the news, Robert W. Baird analyst David Koning, who has a Buy rating on the shares, called the takeover interest as expected given the company’s steady, though slightly slower growth, healthy margins, and a strong balance sheet. He estimates a potential acquisition price between $12 and $13 per share, factoring in AvidXchange’s net operating losses and cash position. Even with valuation under pressure, the analyst is positive about the B2B payments sector and AvidXchange’s potential for long-term growth. His confidence is backed by the launch of new products and improving economic conditions. He maintained his Buy rating with a price target of $12. As of Q4 2024, the company held $389 million in cash and equivalents against only $9.1 million in long-term debt, giving it a strong net cash position.
While we acknowledge the potential of AVDX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVDX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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