1 Super Semiconductor Stock (Besides Nvidia) to Consider for the Second Half of 2024
By Anthony Di Pizio – Jun 27, 2024
Key Points:
- Nvidia has captivated investors with its soaring stock price and powerful AI chips.
- Due to Nvidia's high valuation, investors might find better returns elsewhere in the latter half of 2024.
- Axcelis Technologies presents a promising opportunity, with its stock being significantly undervalued compared to its peers.
Why Axcelis Technologies is a Top Pick for 2024
Nvidia (NVDA) has dominated the stock market in 2024, achieving a staggering 145% gain year-to-date. It briefly held the title of the most valuable company in the world with a market cap surpassing $3.4 trillion. However, Nvidia's sheer size and high valuation may limit its potential for similar gains in the second half of the year. Investors might benefit from exploring other opportunities to diversify their portfolios.
Axcelis Technologies (ACLS) is a key player in the semiconductor industry, providing critical ion implantation equipment used in manufacturing CPUs, DRAM, and NAND chips. Over the past five years, Axcelis' stock has surged by 800%, yet it remains undervalued compared to its industry peers. With a forecasted strong second half of 2024, Axcelis stands out as a potential high-reward investment.
Axcelis and the AI Boom
Nvidia's powerful GPUs are essential for AI workloads, which require extensive processing power, memory, and storage. Axcelis operates in a complementary space, producing equipment vital for the fabrication of various chip types that support AI applications. The AI revolution is driving significant demand for these components, with advanced AI systems demanding more DRAM and enhanced capabilities in devices like smartphones and computers.
Axcelis' Revenue Growth Outlook
In Q1 2024, Axcelis reported $252 million in revenue, a 6.5% decrease from the previous year. Despite this, the company has experienced tremendous growth, with revenue increasing by 23% in 2023 and 39% in 2022. The semiconductor industry's cyclical nature contributed to the slowdown, but management anticipates a revenue rebound in the second half of 2024. Additionally, Axcelis projects reaching a record $1.3 billion in revenue by 2025, supported by a robust order backlog of $1.1 billion.
Valuation and Investment Potential
Axcelis' stock price is currently $139.42, translating to a price-to-earnings (P/E) ratio of 17.9 based on its trailing 12-month earnings. This is significantly lower than the iShares Semiconductor ETF's P/E ratio of 36.9 and the S&P 500's ratio of 24. With the AI industry poised for explosive growth, Axcelis is well-positioned to benefit from increased demand for semiconductor equipment, making its stock an attractive and undervalued option.
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