a few months ago i talked about optic fibers and luckily i was right (LITE). everyones a genius in a bull market anyways right? thats acc the only industry pick ive ever mentioned but yall probably going to say i deleted other posts where I was wrong but regardless of your trust in me please hear me out today.
as we all know, AI has all been about finding the next bottleneck forever. best recent example is HBM memory - there was a massive shortage and bc of that the companies behind HBM (i.e. MU and SNDK) was able to pump extortionate amounts of profit and their stock reflects that. Thus, one logical approach I took when finding my 2 companies was to analyze bottlenecks and approach the industry with a more technical lens.
However, this time I also took a slightly different approach (in addition to analyzing the industry from the mentioned technical lens). I was very interested in BE and AXTI. For some context, for those of you that are not aware, they are both stocks that 10x in like a year. however, what set them apart was that they were not only able to keep those gains, they kept on growing. thus, when examining these companies, i found a few key criteria that i thought would be very important.
- large revenue growth (was looking for at least 20%+)
- strong backlog to show future promise
- institutional holdings: institutions are often better investors than retailers (as much as i hate to admit that) so they oughtta have at least a portion of institutional investors
- arguably most importantly: positioned fairly to capture the next ai bottleneck
the final point being said, we must as ourselves: what is the next ai bottleneck?
after a bit of research, i decided this niche, but i think interesting sector that will blow up is testing.
what i mean by that is companies that specialize in creating equipment and/or testing the products other companies produce. Specifically, i thought HBM memory testing and semiconductor testing is the right bet (given memory clearly is not as cyclical as people thought itd be).
this leads me to my pick: AEHR
for some context, the semiconductor testing industry is currently around 8 billion, and is projected to double within the next decade. and to really explain what the importance of this industry is - because there are a lot more chips and memories out in the industry than ever before due to AI, all processes associated with these chips have also faced increasing demand. among which, is the testing industry. when a chip gets produced, they have to get checked for cracks and general quality. due to the sheer increase in the amount of chips being produced, demand for quality testing has also increased. that is where the testing industry i am talking about comes in. i noticed that in general, this industry has not had too much growth just yet. their growth is not priced in.
AEHR: this is a very symmetrical bet. just looking at their price movement, it can be seen that they already grew a lot. (200%+ in a year). ik this is a lot, but mind you thats what everyone said about MU and BE (2 examples of many). over 75% of holders are institutional, but what sets this company apart is they have a projected 160-200% revenue growth. because this number is so high, there is a lot of uncertainty priced in. If for the next 2 quarters the company can actually show they can sustain this revenue growth, their market cap will likely 2-5x. as for what this company do, they also produce equipment specializing in testing of semis and optics. the technical aspect for both these companies are relatively simple - they basically manufacture stuff that is made for testing equipment.
do yalls own DD, but this is my 2 piece for what i think the next boom will be. any comments and suggestions will be v welcome. i recognize i did not put as much into the specific stock pick - i focused more on the industry in general.