Digi International (DGII) Surged on AI and Automation Demand

Digi International (DGII) Surged on AI and Automation Demand

Mon, August 31, 2026 at 7:02 PM GMT+3 3 min read

• DGII -0.84%
• ^RUT -0.86%

Riverwater Partners, an investment management company, released its 'Small Cap Strategy' Q2 2026 investor letter. The letter can be downloaded here. The Small Cap Strategy underperformed the Russell 2000 in the second quarter as the benchmark experienced one of its strongest risk-on rallies in recent memory, although the strategy remained ahead year-to-date. The quarter was defined by accelerating AI investment, energy market disruptions, and renewed investor appetite for higher-beta stocks, creating headwinds for the firm's quality-focused approach and healthcare positioning. Despite this, stock selection contributed positively in energy, materials, and financials, while healthcare and consumer discretionary detracted due to the fund's disciplined avoidance of speculative businesses. Looking ahead, the firm remains cautiously optimistic, focusing on opportunities created by market dislocations, including AI infrastructure enablers, select consumer companies, healthcare innovators, and energy businesses trading below intrinsic value. The strategy continues to emphasize high-quality companies with strong management teams and attractive valuations, positioning the portfolio for a potential rotation away from speculative market leadership. In addition, please check the Strategy's top five holdings to know its best picks in 2026.

In its second-quarter 2026 investor letter, Riverwater Partners Small Cap Strategy highlighted Digi International Inc. (NASDAQ:DGII) as a material contributor. Digi International Inc. (NASDAQ:DGII) provides business and mission-critical Internet of Things (IoT) connectivity products, services, and solutions in the United States and internationally. On August 28, 2026, Digi International Inc. (NASDAQ:DGII) closed at $75.77 per share. Over the past month, Digi International Inc. (NASDAQ:DGII) returned 6.61%, while its shares have gained 116.16% in the last 52 weeks. Digi International Inc. (NASDAQ:DGII) has a market capitalization of $2.88 billion, and its stock has traded within a 52-week range of $33.41 to $86.84.

Riverwater Partners Small Cap Strategy stated the following regarding Digi International Inc. (NASDAQ:DGII) in its Q2 2026 investor letter:

"Digi International Inc. (NASDAQ:DGII), our industrial internet-of-things connectivity holding, gained approximately 55% as demand for connected infrastructure accelerated alongside the broader AI and automation buildout. Given its expansion into one of our largest holdings, we trimmed modestly during the quarter to fund new ideas and maintain sizing discipline."

Digi International Inc. (NASDAQ:DGII) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held Digi International Inc. (NASDAQ:DGII) at the end of the second quarter which was 17 in the previous quarter. While we acknowledge the potential of Digi International Inc. (NASDAQ:DGII) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Digi International Inc. (NASDAQ:DGII) and shared Conestoga Capital Advisors' insight on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.