With global growth looking mixed and interest rate paths diverging across regions, many investors are searching for focused themes rather than broad market exposure. One area attracting attention is defense innovation, where small-cap tech stocks are working on VR and AR tools for military training and battlefield simulation.

The Small-Cap Tech Stocks Worth Watching In Defense Innovation screener is designed to surface these early-stage companies. It gives you a structured way to track potential future contractors at the intersection of defense and next-gen technology. In this article, you will see 3 of the most interesting stocks from that screener.

Virtuix Holdings (VTIX)

Overview: Virtuix Holdings develops and sells virtual reality treadmills, headsets and content platforms that let users move freely inside games, fitness apps and professional simulations, serving both home consumers and enterprise customers across entertainment, defense, training and therapy use cases.

Operations: Virtuix generates approximately US$4.5 million in revenue from athletic equipment, all from customers in the United States.

Market Cap: US$116.6 million

Virtuix sits at the intersection of VR gaming and serious defense training, with its Omni One and Virtual Terrain Walk systems already in use or on trial with branches of the U.S. military, universities and entertainment venues. Revenue is still small at about US$4.5 million and the company is loss making with liabilities exceeding assets, so investors are dealing with balance sheet pressure, high share price volatility and a rich P/S multiple against peers. At the same time, revenue grew 35.2% in the past year and analysts expect very large future growth, helped by new product launches, content partnerships and defense-focused trials that could widen the addressable market if execution stays on track and funding remains available.

The most followed Simply Wall St Community Narrative on Virtuix, last updated on 24 June 2026, frames the company as more than a VR treadmill maker. Its author places fair value at US$7.50 per share against the current US$3.18, a discount of roughly 58 percent that rests on the view the market is pricing Virtuix as a niche consumer hardware company rather than a three part platform spanning consumer VR, defense training and AI generated walkable terrain.

The narrative leans on the recent run of military testing across the Navy, Air Force, Marine Corps and Army as the catalyst it believes is underpriced, alongside the Meta Quest compatibility deal that widens the consumer funnel, while still flagging dilution risk, the gap between pilots and scaled procurement, and the founder controlled dual class structure. For readers genuinely interested in how that scaling case is built, the full narrative is worth reading alongside the analyst forecasts.

Virtuix revenue is small but growing and the VR treadmills already link gaming, fitness and defense training, yet the real story sits inside the analyst forecasts for Virtuix Holdings, where one key assumption could change everything

Lantronix (LTRX)

Overview: Lantronix is an IoT and edge computing company that supplies hardware, software and services to connect and manage devices such as drones, cameras and industrial equipment across sectors including defense, industrial automation, telecoms and smart cities. Its products span embedded compute modules, out of band management gear, PoE and tracking devices, all managed through its Percepxion and SaaS platforms.

Operations: Lantronix generates essentially all of its US$118.6 million in revenue from Computer Networks, with sales spread across the Americas (US$81.2 million), EMEA (US$21.7 million) and Asia Pacific Japan (US$15.6 million).

Market Cap: US$242.9 million

Lantronix sits at the crossroads of edge computing and defense-focused IoT, with design wins across drones, AI enabled cameras and remote infrastructure that could be important as defense and critical infrastructure customers push for secure, NDAA and TAA compliant hardware and software. Its Percepxion cloud, EdgeFabric.ai and Kompress.ai platforms are aimed at turning more of that hardware footprint into recurring software revenue.

Adoption risk remains, and the company is still reporting losses. Recent collaborations in 5G field connectivity and autonomous systems, plus fresh capital from equity offerings, give Lantronix room to fund growth. However, the reliance on external funding and a relatively new board mean execution and liquidity risk that investors need to weigh carefully.

Lantronix is working to turn its defense-focused hardware footprint into recurring software revenue, but the real story may lie in how analysts view that shift unfolding. Get the full context in the analyst forecasts for Lantronix.

Vuzix (VUZI)

Overview: Vuzix develops AI powered smart glasses, waveguides and AR display modules that are used in enterprise, medical, defense and industrial settings, selling both finished headsets and optical components to other manufacturers around the world.

Operations: Vuzix currently generates all of its US$6.1 million in revenue from Video Eyewear Products.

Market Cap: US$256.1 million

Vuzix provides direct exposure to AR smart glasses and defense grade waveguide optics, with products reported to be in use across warehousing, aerospace, medical and military applications, along with orders from logistics, veterinary and tier one defense customers. At the same time, the company is reporting sizeable losses and has less than one year of cash runway, which raises the possibility of further funding and share dilution if revenue from programs like LX1 and M400 does not increase sufficiently.

The high P/S ratio and past underperformance versus sector indices indicate that expectations are already demanding. A key consideration for investors is whether upcoming contract execution and OEM partnerships will be sufficient to support that level of market confidence or whether the shares may remain exposed to elevated volatility.

Vuzix sits where defense grade optics meet AI wearables, yet the real tension is between contract potential and cash runway. See how the Vuzix financial health report could reshape your view of what happens next.

The three stocks in this article are only a starting point, and the full Small-Cap Tech Stocks Worth Watching In Defense Innovation screener surfaces 27 more companies with equally compelling VR, AR and defense training narratives that you have not seen yet in this list. Use Simply Wall St to identify and analyze the highest conviction ideas by filtering the Small-Cap Tech Stocks Worth Watching In Defense Innovation screener for the specific catalysts, contract profiles and business models that best fit your view of next generation defense tech.

Take Control of Your Investment Journey

If Virtuix or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

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Simply Wall St analyst Mitch Lawler and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.