The thesis

Cirrus Logic is a semiconductor design firm that benefits from the AI buildout. The company has a gross margin of 52.78% and revenue growth of 5.7% year-over-year. With a conviction score of 43, the setup is interesting due to the analyst consensus rating of BUY and a P/E ratio of 15.5x. The company's exposure to semiconductors and AI compute makes it a key player in this space.

Why now

The current market dynamic, driven by China's chip tool push and the US-China squeeze, makes this the right moment to pay attention to Cirrus Logic. The AI buildout is expected to continue, with Malaysia emerging as a growth standout in Asia, driven by AI and chip investments.

What to watch

Over the next quarter, watch for Cirrus Logic's revenue growth and gross margin performance to confirm the thesis. The company's ability to maintain its net margin of 20.75% and navigate the US-China trade tensions will be key indicators of its success.

Key risks

The company faces valuation risk, with a DCF intrinsic value of $165, and execution risk, as it relies on external manufacturing partners. Additionally, the US-China trade tensions pose a macro risk to the company's operations and supply chain.

Theme exposure