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Message: NVIDIA Is Soaring: This Disruptive Canadian Chip Stock Could Be Next
NVIDIA Is Soaring: This Disruptive Canadian Chip Stock Could Be Next
NVIDIA (NASDAQ:NVDA) stock is getting expensive. Could POET Technologies (TSXV:PTK) be better?
NVIDIA Is Soaring: This Disruptive Canadian Chip Stock Could Be Next | The Motley Fool Canada
Published June 26, 1:45 pm EDT
NVIDIA (NASDAQ:NVDA) stock has been getting a lot of attention lately. A key supplier to the nascent generative artificial intelligence (AI) industry, its stock is up 197% year to date. Interestingly enough, this rally has taken place without much of an improvement in the company’s fundamentals. In its most recent quarter, the company’s revenue and earnings both decline. It did guide for $11 billion in revenue for the upcoming quarter, but that was just a prediction; the company may fail to hit it. What we know is that last quarter, the company’s revenue declined.
So, we know that NVIDIA stock is a key supplier to AI companies, and we know that its earnings have been trending downward. We also know that the stock is very expensive, trading at 42 times sales. It certainly looks like a name that investors should approach cautiously. In this article, I will explore a Canadian chip company that may have more room to run than NVIDIA does.
POET Technologies
POET Technologies (TSXV:PKT) is a Canadian technology company that develops chip solutions for AI and machine learning (ML). Much like NVIDIA, its chips and related technologies are used in the rapidly growing AI field. Unlike NVIDIA, it is not a large company with countless investors already aware of it.
POET’s chip technologies are mainly used in cameras. It claims to have developed the first-ever device that integrates electronics and photonics at the wafer level. In other words, the company’s chips help integrate photography and camera tools more tightly than before, potentially resulting in faster performance. This could make it an important supplier to smartphone companies, who use cameras as key selling points for their devices.
Financials
Since it went public, POET technologies has been releasing financial data revealing how it is performing as a company. Among other things, we’ve seen the company begin earning revenue and slightly narrow its losses from previous quarters. In its most recent quarter, POET delivered the following:
- $180,000 in revenue — up from $0 in the same quarter a year before
- A $5.27 million net loss — improved from $5.4 million in the same quarter a year before
- A $0.14 per share loss — improved from a $0.15 per share loss in the same quarter a year before
As you can see, POET is certainly losing money. In fact, it has very large, negative margins. However, note that things are trending in a positive direction. The losses are slowly shrinking, and revenue is now coming in. If POET Technologies can keep up its trajectory, then it may become a real chip giant some day.
Future potential
It’s one thing to note that POET Technologies could be a success but quite another thing to claim that it will be one. As of today, it’s a very small company, doing only $180,000 per quarter in revenue while losing millions. The company has a long way to go before it’s a big player in the semiconductor industry. But trends are looking good, and the company has a unique industry niche. It could do great things.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Nvidia. The Motley Fool has a disclosure policy.
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