Plenty of products -- and even some entire industries -- have come and gone, made obsolete by something newer and better. Polaroid cameras, dial-up modems, and encyclopedias come to mind. Landline phones and newspapers are fighting for their survival as well, upended by superior solutions.
While advances in technology can bring an end to companies who offer goods and services that are rendered obsolete, there are some names in the tech sector that are positioned to last because they can leverage change to their advantage. For investors, it just means technology stocks are great long-term investments despite their short-term volatility.
With that backdrop in place, might Axcelis Technologies(NASDAQ: ACLS) be the greatest technology investment you've never heard of?
Axcelis Technologies' must-have product
The technology arena is dominated by behemoths like Nvidia, Taiwan Semiconductor, and Broadcom. It's an industry that lends itself to size, after all, favoring those companies that can afford to invest more than smaller would-be rivals.
However, the semiconductor business is also a great equalizer, rewarding smaller players that figure out how to do something better and then patenting that game-changing idea.
Axcelis Technologies is decidedly the latter. Its $3 billion market capitalization doesn't even hold a candle to Nvidia's $2 trillion. But, the company's Purion ion implantation platforms are quickly becoming a must-have solution for any company that makes high-performance processors, image sensors, or memory chips.
Image source: Getty Images.
Don't know what that means? You're not alone. Here's the layperson's explanation.
Modern-day semiconductor circuitry is small. Like, really small. The width of the bands of electrically conductive silicon found in most high-performance microchips these days is as narrow as 10 nanometers or less. (For perspective, the average human hair is about 100,000 nanometers thick, a typical virus is 100 nanometers across, and a single atom is no greater than 0.5 nanometers wide.) This ultra-small tech is very fast and energy-efficient, making such solutions appealing to anyone making and using them.
As you can imagine, though, manufacturing this tech is also complicated, with no margin for error. The semiconductor industry is literally designing equipment and foundry processes with atomic particles in mind. The industry is also fusing multiple kinds of materials together to create solutions that don't naturally exist on their own.
Enter Axcelis Technologies, which offers an array of ion implanters to chipmakers.
Just as the name suggests, ion implantation is the process of permanently depositing ions onto a solid substrate, fusing the two materials to create a unique, necessary one that can't be manufactured any other way. In this case the ion in question is usually a carbon item, creating silicon carbide that's capable of operating at higher voltages as well higher temperatures than more conventional silicon. This material is required for many common electronics like digital cameras, computers, electric vehicles, smartphones, and more -- and increasingly so.
Albeit it unevenly, Axcelis's revenue soared since 2020, largely in conjunction with the mainstreaming of artificial intelligence and electric vehicles as well as the sharp improvements in the energy efficiency of most consumer electronics.
ACLS Revenue (Quarterly) data by YCharts
More of the same is in store too.
Sizing up Axcelis Technologies stock
While technology companies now recognize silicon carbide is often the superior option (if there is an option), that doesn't mean all tech companies are willing and able to purchase this equipment. Ion implanters can cost millions of dollars each.
To this end, this company's top line is expected to be more or less flat this year, reflecting the economic uncertainty that's got plenty of technology companies tightening their purse strings.
Take a step back and look at the bigger picture, though. The need is real. Would-be and current customers -- including Samsung and Texas Instruments -- can't wait forever to buy such equipment if they want to remain competitive. Market research firm Technavio says the worldwide ion implanter market will likely grow at an annualized pace of a little more than 5% through 2027, jibing with outlooks from Data Bridge and GII Research.
It's admittedly not a lot of growth, even if it's going to be consistent growth.
It's a growth pace, however, that Axcelis Technologies is apt to outpace by virtue of being one of the better companies in its particular sliver of the business.
That's the aforementioned silicon carbide, by the way. Investment research house William Blair suggests Axcelis controls roughly three-fourths of this particular market. Moreover, given the company's commanding lead and its technological know-how, William Blair analyst Jed Dorsheimer believes Axcelis Technologies could readily produce double-digit revenue growth into the foreseeable future.
Could a $15,000 investment in Axcelis turn into a million-dollar holding in less than a lifetime? Probably not.
But Axcelis is a solid pick for investors looking for a bit more exposure to the technology sector. The world will only need more silicon carbide tech in the future, and it's also going to be tough for a rival to meaningfully step onto the company's growing turf. Its Purion systems are just that impressive, not to mention highly patent protected.
All of this is why the small crowd of analysts following this company maintain a consensus price target of $156 in spite of the stock's pullback from its 2023 peak. That's nearly 60% above the stock's present price -- plenty of upside potential for newcomers who can stomach the risk.
If you genuinely need to turn $15,000 into a seven-figure sum, however, you might want to look at other, higher-growth prospects.
Of course, know that it would be quite a feat for any stock to turn $15,000 into $1 million or more. It would take an Amazon-like miracle to make it happen, and those are few and far between. Sometimes swinging for the fences like that can do more harm than good. Just be sure your expectations for any stock are realistic.
Should you invest $1,000 in Axcelis Technologies right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia, Taiwan Semiconductor Manufacturing, and Texas Instruments. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
