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Micron Technology (NASDAQ: MU) supplies some of the world's best high-bandwidth memory (HBM) for data centers, which is critically important for processing artificial intelligence (AI) workloads. Demand for this hardware far exceeds supply, which is why Micron stock has exploded higher by 700% over the past year.

But another company is also benefiting from the blistering demand for memory. Axcelis Technologies (NASDAQ: ACLS) sells ion implantation machines, which play an essential role in the manufacturing of memory chips and other semiconductor hardware. As companies such as Micron race to expand their production capacity, they will have to buy more of this equipment.

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Axcelis stock is sitting on a 12-month gain of 170%. But is there more upside ahead?

Axcelis has three primary business units which account for 90% of its revenue:

Power: Axcelis sells ion implantation machines for power semiconductors, which control the flow of electricity between chips and other devices. The company specializes in complex chemistries, including silicon carbide which is popular in the electric vehicle industry because it facilitates rapid battery charging.

General Mature: This segment includes ion implantation equipment for mature-node chips, which are the basic processors that power everyday electronics including Wi-Fi modems, vehicle infotainment systems, and camera sensors.

Memory: This is where Axcelis accounts for sales of ion implantation machines to manufacturers of memory chips, whether they are making HBM for data centers or direct random-access memory for computers and smartphones.

Ion implantation is a highly complex but crucial process that occurs in the very early stages of semiconductor production. Chips start out as basic sheets of silicon crystal, so to turn this raw material into functioning memory cells, ion implantation machines have to fire tiny charged atoms into the wafer to map out how electricity should flow.

Memory has become a critical piece of the AI hardware stack. HBM for the data center sits alongside graphics processing units (GPUs), which are the primary chips used in AI workloads. A low memory capacity would create bottlenecks, forcing GPUs to pause while they wait to receive more data. This situation would lead to a subpar experience for anyone using an AI chatbot or AI agent.

During the first quarter, Axcelis shipped the highest number of ion implantation systems to the memory industry since 2023, leading to a strong uplift in revenue and bookings. The company plans to expand its presence in the memory segment to capture as much value from the AI opportunity as possible.

Axcelis generated $199 million in total revenue during the first quarter, representing an increase of just 3% from the year-ago period. The memory segment accounted for only around one-third of the company's revenue, so its strength was offset by weakness in other areas, including the general mature business.

Wall Street's consensus estimate (from Yahoo! Finance) suggests Axcelis will generate $842 million in revenue during 2026 overall, which would be flat with last year. However, analysts then expect revenue to grow by over 9% to $921 million in 2027, suggesting the company could soon find some momentum.

Nevertheless, there's no denying that Axcelis' top line is sluggish right now, especially compared with the blistering triple-digit percentage revenue growth that companies like Micron are producing. However, memory manufacturers are currently scrambling to expand production capacity, so it's possible Axcelis will surprise Wall Street with higher orders than expected over the next 12 to 18 months. That might explain why investors are piling into its stock.

Axcelis generated GAAP earnings of $3.21 per share over the past four quarters, which places its stock at a price-to-earnings (P/E) ratio of 48.9. That means this stock is far more expensive than the S&P 500 and Nasdaq-100 indexes, which currently trade at P/E ratios of 26.5 and 35.6, respectively.

Axcelis is also more expensive than Micron, which is trading at a P/E ratio of 35.5, so it doesn't look like a good value right now no matter which way you slice it. However, its current price might actually look like a bargain when investors reflect back on this moment in three to five years, and here's why.

It's clear that building more HBM production capacity won't be possible without the kind of ion implantation machines supplied by Axcelis. But AI workloads are slowly migrating from data centers to personal computers and smartphones, which, according to Micron, is already fueling a surge in demand for memory capacity from manufacturers of those devices.

Therefore, Axcelis is going to have a massive opportunity to sell equipment even after the AI data center spending boom slows down. Nevertheless, buying its stock at such a high valuation today does open the door to some downside risk, so investors should make it only a small part of their portfolio. They can always add to their position in the future if the stock declines to a more attractive level.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.

If You Like Micron Technology, You Might Love This Other Super Semiconductor Stock was originally published by The Motley Fool