Nvidia (NASDAQ:NVDA) has been in the stock market spotlight in 2024, which is not surprising considering its 145% year-to-date gain. For a brief moment in June, it even became the most valuable company in the world when its market capitalization eclipsed $3.4 trillion.
It is Nvidia stock unlikely to generate comparable gain in the second half of this year, purely due to its size and valuation relative to its earnings. For this reason, investors may be better off looking to other stocks to grow their portfolio.
Axcelis Technologies (NASDAQ:ACLS) is a critical service provider to the semiconductor industry. Its stock has soared 800% over the past five years, but it remains incredibly cheap compared to its peers. Management is forecasting a strong second half of 2024, so here’s why this could be the perfect stock to buy right now.
Axcelis will benefit from artificial intelligence
Nvidia designs powerful graphics processing chips (GPUs) which have multiple applications, particularly in data centers that help developers create, train and deploy artificial intelligence (AI) models. Axcelis plays in a different space, manufacturing ion implantation equipment essential for manufacturing processors (CPUs), memory chips (DRAM), and storage chips (NAND).
AI workloads require high capacity from all three chip types. For example, all data center GPUs designed by Nvidia have built-in memory, and some of the most advanced GPUs, like the new Blackwell-based GB200, also feature CPUs to improve efficiency. Then there’s the fact that AI applications are no longer just used in data centers and are making their way to devices, from computers to smartphones, that require much more processing power, memory and storage .
Micron Technology claims that next-generation AI computers will require up to 80% more DRAM capacity than traditional computers, and that AI-enabled smartphones could require twice as much as their predecessors.
Axcelis CEO Russell Lowe recently highlighted this shift as a potential source of future demand. He said AI would require a significant expansion of manufacturing capabilities in the semiconductor industry, which should translate into increased equipment sales for Axcelis.
Axcelis is preparing for a re-acceleration of its turnover growth
Axcelis generated $252 million in revenue in the first quarter of 2024 (ended March 31), down 6.5% from the same period a year earlier. That’s not an ideal result, but the company is coming off an incredible growth streak with revenue up 23% in 2023 (to a record $1.13 billion) and 39% in 2022.
The semiconductor industry is cyclical, especially in segments like computers and appliances, where consumers and businesses may only upgrade once every two years. This is part of the reason Axcelis’ growth took a pause in early 2024, but this pause is expected to be temporary. Management says revenue is expected to increase in the second…
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