As Market Sorts Out AI, I’m Playing 2 Small-Cap Biotechs

Following the messy market action on Wednesday, we have some decent bounce action on Thursday. Breadth is only running about 52% positive and the defensive names like pharmaceuticals and consumer goods are down, but the Magnificent Seven stocks (MAGS) are up 1.8% despite the more than 9% hit to Meta Platforms (META). Data centers and chips are the primary beneficiaries of the bounce after the recent carnage they have suffered.

These bounces are giving aggressive traders some relief, but I’m not trusting that this is a major turn. It looks like a routine oversold bounce. Whether it develops into support for an intermediate uptrend we will have to wait to see, but with big earnings tonight from Amazon (AMZN) and Apple (AAPL) there is still plenty of uncertainty.

Oil is slightly lowerm but bonds remain under pressure. The bonds are the key issue right now but investors are intensely focused on the AI-related names because they have been favorites for so long.

Many folks are convinced that the AI theme will continue for many years. They are likely correct, but AI is no longer trading like a single monolith. There will be big winners and losers and we are in the process of sorting it out right now. Apparently Meta is one of the losers and Microsoft (MSFT) is one of the winners, at least for today. This is going to be an ongoing theme for a very long time.

Game Plan: Two Stocks I’m Playing

My game plan hasn’t changed. I’m staying patient and eyeing names that have been punished by the volatility but still have solid fundamentals and developing charts.

Two on my screen right now are The Oncology Institute (TOI) and small biotech Precigen (PGEN). I think both will report solid earnings in the next few weeks.

The Oncology Institute runs cancer clinics in local communities rather than at large hospital centers, with more than 100 locations and affiliate sites across five states. The bet is that most patients would rather receive their chemotherapy close to home, and that treating them outside the hospital setting would cost insurers and Medicare plans much less. That business model is why reimbursement rules move this stock.

TOI sold off on a misreading of the new Medicare reimbursement rules for cancer care. The market treated the rules as a negative, but the details look neutral to positive. Radiation oncology, an area the company is expanding into, gets a modest bump, and the hit to its core fee-for-service oncology is minor. The gap between the reaction and the reality is the mispricing, so I’m building the position.

Precigen had a strong first quarter and just made HC Wainwright’s top picks for the second half of 2026, with a $14 target. The firm sees 2026 as the pivotal year, when Precigen shifts from a single-product rare-disease biotech to a multi-asset, cash-flow-positive company.

The product is Papzimeos, which treats recurrent respiratory papillomatosis, a rare disease in which HPV causes growths to keep returning in the airway. Until the drug was approved last August, the only option was surgery to remove the growths, repeated over and over for years. Papzimeos is the first approved therapy that goes after the cause rather than the symptom, and the launch has run ahead of expectations. The drug holds orphan exclusivity through 2032 and the company is working to expand the label. Oncology data on PRGN-2009 is due by year-end, a key pipeline catalyst, and any commercial contribution from it is upside.

I am long both stocks and looking for chances to add more as the charts develop. There are plenty of other opportunities similar to these as we head into small cap earnings season and I’ll be hunting for entry points.

At the time of publication, DePorre was long TOI, PGEN.