The U.S. GDP grew 3% in the second quarter of 2025, which exceeded expectations. However, tariff uncertainty clouds the headline growth figure. The majority of the improvement was driven by a large decline in imports, particularly after a record surge in imports in 1Q25.
One area that hasn’t slowed, regardless of the headlines or tariff polices: Artificial Intelligence. Companies are still investing billions in the space, each hoping to carve out their place in the trillion-dollar industry. NVIDIA (NVDA), often considered a measuring stick for broad AI, is up 30%+ year-to-date. Anthropic is reportedly raising $5 billion in a new round of funding that would value the company at $170 billion, up from $62 billion earlier this year.
With billions flowing into the industry and driving up valuations, there couldn’t possibly be any stocks in the AI space that still look cheap, right? Wrong.
Our latest Long Idea is a great example of the edge that our superior fundamental research provides. This company is an industry leader, benefits from AI tailwinds, has strong fundamentals, and its stock looks undervalued.
Below, we present a large excerpt from this week’s Long Idea report, available to Pro and Institutional members. You can buy the full report a la carte here.
We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.
This stock offers favorable Risk/Reward based on the company’s:
- position to profit from AI-driven tailwinds,
- shifting revenue mix to higher value products,
- high profitability, and
- cheap stock valuation.
You need a Professional Membership or higher to view all the content on this page.
Already a member?
Learn more about our research here.
AI Is Driving Photomask Demand
As a leading photomask manufacturer, this company is well-positioned to profit from the photomask demand growth driven by advancements in each of these three key areas:
- chip technology – smaller integrated circuits require higher value photomasks,
- capacity expansions – more chips mean higher photomask demand, and
- consumer electronics – improved screens and more (advanced) chips drive photomask demand.
SEMI projects global semiconductor manufacturing capacity to grow 7% compounded annually from the end of 2024 through 2028.
Additionally, according to the Semiconductor Industry Association (SIA), global semiconductor sales grew 20% year-over-year in May 2025 and 3.5% month-over-month (MoM).
Longer-term, the global semiconductor market will grow 8% compounded annually from 2025 to 2034, according to Precedence Research. The long-term outlook for semiconductor demand indicates this company will have ample growth opportunities.
Figure 1: Global Semiconductor Market Size: 2024 – 2034
Sources: Precedence Research and New Constructs, LLC
Advanced chipmaking catered to the growing needs of AI applications is a key driver of the projected semiconductor market and capacity growth. AI chips require increased computational abilities, specialized processes, and specific energy needs. Advanced semiconductor technology demand is expected to remain strong, as AI (and its specific chips) gets integrated at a rising rate across many consumer electronics, from phones to computers, vehicles and smart devices (such as smart speakers).
Quality Fundamentals
Apart from industry tailwinds and growing competitive advantages, this company has also grown revenue and Core Earnings, a superior metric of earnings, by 6% and 25% compounded annually since fiscal 2014, respectively. See Figure 2.
The company improved its net operating profit after-tax (NOPAT) margin from 5% in fiscal 2014 to 19% in the TTM while invested capital turns increased from 0.5 to 0.6 over the same time. Rising NOPAT margins and invested capital turns drive return on invested capital (ROIC) from 2% in fiscal 2014 to 12% in the TTM.
Additionally, the company’s NOPAT grew 21% compounded annually from $22 million in fiscal 2014 to $163 million in the TTM.
Figure 2: Revenue and Core Earnings Since Fiscal 2014
Sources: New Constructs, LLC and company filings
…there’s much more in the full report. You can buy the report a la carte here.
Or, become a Professional or Institutional member – they get all Long Idea reports.
I’ll keep sending information on quality sectors, industries, or specific companies until you’re ready to start your membership, but know that we expect this pick to outperform.
Interested in starting your membership to get access to all our Long Ideas? Get more details here.