Nvidia (NASDAQ: NVDA) has owned the inventory market highlight in 2024, which is not stunning given its 145% year-to-date achieve. For a quick second in June, it even grew to become probably the most worthwhile firm on this planet when its market cap eclipsed $3.4 trillion.
It is unlikely Nvidia inventory will ship a comparable achieve within the second half of this yr, purely due to its sheer measurement and its valuation relative to its earnings. For that motive, buyers may be higher off taking a look at different shares to drive their portfolios ahead.
Axcelis Applied sciences (NASDAQ: ACLS) is a vital service supplier to the semiconductor business. Its inventory has soared 800% over the past 5 years, but it is nonetheless extremely low cost in comparison with its friends. Administration is forecasting a robust second half of 2024, so here is why it may very well be the perfect inventory to purchase proper now.
Axcelis will profit from synthetic intelligence
Nvidia designs highly effective graphics processing chips (GPUs) which have a number of purposes, together with being utilized in knowledge facilities that assist builders construct, practice, and deploy synthetic intelligence (AI) fashions. Axcelis performs in a special house, manufacturing ion implantation gear that’s vital to the fabrication of processors (CPUs), reminiscence (DRAM) chips, and storage (NAND) chips.
AI workloads require numerous capability from all three of those chip sorts. As an example, all knowledge heart GPUs designed by Nvidia have built-in reminiscence, and a number of the extra superior GPUs like the brand new Blackwell-based GB200 are additionally fitted with CPUs to spice up effectivity. Then there’s the truth that AI purposes are transitioning out of simply being utilized in knowledge facilities and are making their method into units, from computer systems to smartphones, which require considerably extra processing energy, reminiscence, and storage.
Micron Know-how says next-generation AI computer systems would require as much as 80% extra DRAM capability than conventional computer systems, and AI-enabled smartphones may require twice as a lot as their predecessors.
Axcelis CEO Russell Lowe just lately highlighted that very shift as a possible supply of future demand. He mentioned AI would require vital manufacturing capability expansions throughout the semiconductor business, and that ought to translate to extra gear gross sales for Axcelis.
Axcelis is getting ready for its income progress to reaccelerate
Axcelis generated $252 million in income throughout the latest first quarter of 2024 (ended March 31), which was a 6.5% drop from the year-ago interval. That wasn’t an excellent outcome, however the firm is coming off an unimaginable run of progress with income growing by 23% in 2023 (to a file $1.13 billion), and 39% in 2022.
The semiconductor business is cyclical, particularly in segments like computer systems and units the place customers and companies may solely improve as soon as each couple of years. That is a part of the rationale Axcelis’ progress took a pause within the early phases of 2024, but it surely’s anticipated to be momentary. Administration says income ought to enhance within the second half of the yr in comparison with the primary half.
Plus, Axcelis is already guiding for income to hit a brand new file of $1.3 billion in 2025. To not point out, the corporate nonetheless has a large order backlog price $1.1 billion, so there’s loads of work within the pipeline within the meantime.
Axcelis is grime low cost in comparison with different chip shares
Axcelis inventory is up simply 9% in 2024 due to its income slowdown within the early phases of the yr. Nevertheless it’s up 800% over the past 5 years, but it stays low cost. Based mostly on its trailing-12-month earnings per share of $7.57 and its present inventory value of $135.59, it trades at a price-to-earnings (P/E) ratio of simply 17.9.
That is an enormous low cost to the iShares Semiconductor ETF, which trades at a P/E ratio of 36.9. The ETF holds each main chip inventory together with Nvidia, so it is a terrific benchmark for the business. However taking a broader view, Axcelis inventory can be less expensive than the S&P 500 index, which trades at a P/E ratio of 24.
The AI alternative is big. Superior Micro Units says hundreds of thousands of private computer systems fitted with its AI chips have already shipped, from main producers like Dell Applied sciences and HP. Microsoft additionally simply revealed an AI pc of its personal, known as Copilot+.
Plus, Apple is gearing as much as launch its iPhone 16 later this yr, which ought to characteristic a robust new chipset to run its AI-centric iOS 18 working system. It additionally plans AI-related upgrades to its computer systems and tablets.
The purpose is, this development is simply warming up, and there is each likelihood Axcelis’ order backlog grows within the coming years as chipmakers race to fill AI demand from all of these new sources exterior the info heart. By way of that lens, Axcelis inventory seems like an absolute cut price on the present value.
Must you make investments $1,000 in Axcelis Applied sciences proper now?
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Anthony Di Pizio has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Units, Apple, HP, Microsoft, Nvidia, and iShares Belief-iShares Semiconductor ETF. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
1 Tremendous Semiconductor Inventory (Apart from Nvidia) to Purchase Hand Over Fist for the Second Half of 2024 was initially printed by The Motley Idiot