The thesis

NVE Corporation develops spintronic devices with high margins, including a gross margin of 79.26% and a net margin of 57.64%. The company's revenue growth is 80.8% year-over-year, driven by the AI buildout. With a conviction score of 30, the setup is interesting due to the disconnect between growth and valuation. The company's exposure to semiconductors and AI compute themes adds to its compelling story.

Why now

The current macro moment, with China's chip tool push and AI-driven growth, makes NVEC a company to watch. The recent surge in AI adoption, with AI capital expenditures growth being a key driver, has increased the company's relevance.

What to watch

The company's future revenue growth and margin maintenance will be key indicators to watch over the next quarters. The upcoming earnings reports and industry updates on AI adoption and semiconductor demand will confirm or deny the thesis, with a specific focus on NVEC's ability to sustain its current growth rate.

Key risks

Valuation risk is a concern, with a P/E ratio of 34.6x, which may be unsustainable if growth slows. Execution risk is also present, as the company needs to maintain its high margins and revenue growth. Competitive risk from established semiconductor players is another threat to NVEC's success.

Theme exposure