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.
