The semiconductor stocks have been some of the hottest momentum plays in recent years. And while things have cooled off, with a bit of increased volatility in both directions, it’s hard to believe that this is curtains for the so-called “picks and shovels” plays that have been standing directly behind the ongoing AI revolution.
As always, though, it’s hard to tell if stocks behind an unstoppable theme will be a good investment, given the price of admission one will have to pay after an already heated run. When it comes to semiconductor stocks, though, not all names are wildly undervalued.
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The semiconductor stocks have been overheated, but there’s still value and hidden gems out there
Perhaps the most obvious one of them all, Nvidia, actually looks like it’s a relative bargain at under 29 times trailing price-to-earnings (P/E). Of course, there’s more than just the surface P/E multiple when it comes to chip stocks, especially the ones helping fuel the great AI data centre buildout.
There’s bound to be some front-loaded capital expenditures going towards chips. And, with that, there might be a bit of a wintery period for the semis.
Who knows when that will happen, though, especially with some pundits looking for $1 trillion in AI capital expenditures in the next year. While we might not be at the very beginning of the semi boom, it’s hard to tell if we’re in the middle innings or closer to the end.
But, for now, those who think there’s no stopping the semi boom (which has arrived in Canada), perhaps one of the Canadian semi plays is worth a closer look.
Sure, many Canadians look at U.S. stocks for their tech and semi fix. In my view, it’s worth considering the kinds of innovations to be had on this side of the border as well, especially as data centres look to move into orbit and space solar panels evolve into a new kind of growth market.
5N Plus is a specialty semi play that’s coming back after a breather
Enter shares of 5N Plus (TSX: VNP), which have made a name for themselves after a jaw-dropping run, gaining 333% in the last two years. Year to date, there’s been increased turbulence, with shares shedding around half of their value from peak to trough as part of a broader semi pullback. In my view, it’s more industry-wide pressure than anything else. Year-to-date, the stock is still up around 64%. And with shares recently ricocheting, up over 18% in a week, I do think that the case for buying the dip is growing stronger by the day.
Indeed, 5N Plus is a lesser-known name, but it’s one worth knowing about, especially since the market cap is now above $2.6 billion. The specialty semiconductor and performance materials company has been experiencing some pretty solid growth of late. With the concept of space data centres (with their own solar power) being brought up this year by Elon Musk’s space firm, 5N Plus’ solar business could get a nice boost, especially if orbital data centres are really ready to take off.
With big-name customers driving demand for space solar cells and rare earth metals, perhaps 5N Plus is a name that U.S. investors should take notice of as firms look to consider betting on suppliers of major firms behind big technological trends for a relative discount.
Add the on-Earth renewable energy boom and other electrifying trends on the firm’s side, and perhaps the lesser-known Canadian firm might be a growth gem to brighten up a high-risk growth investor’s portfolio.
