The performance of Nvidia over the past year has been nothing short of incredible. The artificial intelligence (AI) poster child has risen 248% over the past year, fuelled by huge growth in demand for chips and software. I’m on the hunt for stocks to buy that could replicate this kind of performance. I think I’ve found a potential contender.
A key part in the tech revolution
The firm I’m focused on is Alphawave IP Group (LSE:AWE). The stock is up an impressive 86% over the past year, which has swelled the market-cap to just over a billion.
According to documents relating to the IPO in 2021, Alphawave “designs industry-leading wired connectivity solutions that enable data to travel faster, more reliably, using lower power”.
In other words, it provides connectivity solutions for chips, which it then licenses out the designs to chip manufacturers. The hardware then ultimately gets used in everything from smartphones to AI systems.
Demand for this service is growing, especially since the boom in the sector over the past year. Evidence of this can be seen from the half-year report. Revenue jumped 228% year-on-year to $187m. This in part helped profit before tax to come in at $15.4m from $6.7m in the year prior. Full-year results for 2023 are expected out shortly.
Growing with AI demand
Looking forward, I think the stock could surge further as it catches up with the AI world we’re quickly being exposed to. Its management team referred to the business working on “a growing range of advanced connectivity solutions that enable the next generation of AI and cloud infrastructure”.
It’s hard to put an accurate forecasted size of the AI market over the next decade. This is simply because it encompasses so many different elements. Yet from sources online, it’s comfortably in the hundreds of billions of dollars by 2030. Given the role that the connectivity solutions from Alphawave will have, I think it’ll grow significantly in the coming years.
A risk is that it doesn’t have the scope to grow at the pace of demand. This is valid, but Alphawave isn’t a manufacturer, just a designer. Therefore, this should ease some of the potential growing pains.
Thinking about the share price
It can be hard for some stocks to provide serious returns due to the fact the firm is already quite mature and large. I don’t think this is the case for Alphawave, which isn’t even in the FTSE 250 at the moment.
Given the current market-cap, I feel the stock has room to run higher before it starts to slow. Granted, the price-to-earnings ratio of 234 is ridiculously high. Yet a lot of optimism about future earnings is factored in here. So even though this could be a red flag for some investors, I think it’s something I have to live with based on a hot growth stock with large potential.
I think that Alphawave can mimic the share price growth of Nvidia in coming years and I’m seriously thinking about buying.
The post 1 stock to consider buying that could be the next Nvidia appeared first on The Motley Fool UK.
Should you buy Alphawave Ip Group Plc now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
Shell’s share price has dropped 12%, so should I buy more?
I bought Fundsmith Equity last June. Should I have bought Nvidia stock instead?
I asked an AI about the Lloyds share price. Oh dear!
2 dividend stocks down 30% this decade to consider buying right now
How I’d try and turn a £20k Stocks and Shares ISA into a recurring £16,634 income
Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
