We recently published a list of 10 Undervalued Semiconductor Stocks to Buy According to Analysts. In this article, we are going to take a look at where Axcelis Technologies, Inc. (NASDAQ:ACLS) stands against other undervalued semiconductor stocks to buy according to analysts.
Global market intelligence firm IDC, in its most recent report, projected a 15% growth for the global semiconductor market in 2025, driven by the relentless rise in demand for artificial intelligence (AI) and high-performance computing (HPC). According to their analysts, this surge will be fueled by forthcoming upgrades in key application markets, notably cloud data centers. Further emphasizing the industry’s promising growth outlook, Nicolas Gaudois, head of Asia-Pacific technology research at UBS, stated in a recent CNBC interview that AI-compute will continue to underpin growth in 2025. He observed:
“The 21% growth in the semiconductor market was mostly driven by AI-compute demand while non-AI growth actually declined. In 2025, AI would remain the growth driver with 40% growth but we expect non-AI portion to also grow by 17% due to several factors such as autos and industrial markets growth improving, restocking (customers buying for their inventories) in those markets and also increase in semiconductor content in devices to support edge (on-device) AI.”
Nicolas also suggested that GPU chipmakers and foundries will remain the main beneficiaries of AI demand and will make the most money from it. With the semiconductor space ripe for further growth, we have picked 10 semiconductor stocks that are undervalued and are best placed to benefit from this growth.
Our Methodology
To identify the 10 undervalued semiconductor stocks, we carried out thorough research and used stock screeners to compile a list of U.S.-listed companies. Our criteria included a market capitalization of over $2 billion, an expected share price upside of at least 10%, and a Forward PE ratio below 30x. Ultimately, the stocks were ranked in ascending order of their upside potential. These stocks are also popular among elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of an engineer working on precision semiconductor chip fabrication.
Axcelis Technologies, Inc. (NASDAQ:ACLS)
Upside Potential: 66%
Fwd. PE: 12.2
Axcelis Technologies, Inc. (NASDAQ:ACLS) tops our list with a notably low forward P/E ratio of 12.2x. This semiconductor equipment company specializes in designing, manufacturing, and servicing ion implantation systems used in semiconductor chip fabrication. Recently, a Craig-Hallum analyst reiterated his Buy rating on Axcelis Technologies, Inc. (NASDAQ:ACLS) with a target price of $105. While he anticipates some market softness in the first half of the year, he expects demand to improve in consumer, automotive, and industrial end markets, which should benefit Axcelis Technologies, Inc. (NASDAQ:ACLS).
The company has projected that new interim final rules from the U.S. Department of Commerce Bureau of Industry and Security (BIS) regarding semiconductor equipment exports to China could potentially reduce its total annual revenue by $20 million to $50 million in 2025. Despite this near-term headwind, Axcelis Technologies, Inc. (NASDAQ:ACLS) has robust growth drivers to support its long-term trajectory. During the Q3 2024 call, management highlighted three key growth catalysts:
“We are well positioned as the market leader in implant for silicon carbide given the breadth of our portfolio and focused investments we’ve made in this market for several years. We remain very excited about the following long-term growth opportunities that lie ahead. First, continued growth in adoption of silicon carbide as a key enabler of electrification, power efficiency and decarbonization. Second, a cyclical recovery in our memory and general mature markets. And finally, penetration of the Japan market where we aim to extend the success we’ve made in Power to other markets within Japan.”
Overall, ACLS ranks 1st on our list of undervalued semiconductor stocks to buy according to analysts. While we acknowledge the potential of ACLS to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ACLS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.