Artificial intelligence (AI) is primarily deployed using centralized data centers, but it's slowly migrating to computers and smartphones, which could drive a productivity boom across the economy. None of that would be possible without the advanced semiconductors supplied by companies like Nvidia, Advanced Micro Devices, and Micron Technology.

Some smaller companies provide critical equipment and services to those chip giants, but they tend to get less attention from investors. Axcelis Technologies (NASDAQ: ACLS), for example, supplies chip manufacturers with ion implantation equipment critical to the fabrication process, and AI is already driving up demand for the company's products.

Axcelis stock is very cheap relative to its peers right now. Here's why it might be a great buy as the AI revolution gathers momentum.

A unique way to invest in the AI revolution

Ion implantation is a necessary part of the fabrication process for central processing units (CPUs), memory chips, and power devices (which regulate electric power in high-current applications). The power device segment has been especially lucrative for Axcelis over the last couple of years, thanks to the electric vehicle industry, which constantly looks for ways to charge batteries more quickly and squeeze more miles out of every charge.

But data centers built for AI present a new opportunity in this space because they consume a lot of energy. Some of Axcelis' customers started using silicon carbide-based trench MOSFET (metal oxide semiconductor field effect transistor) power devices for their AI infrastructure. The silicon carbide chemistry is more heat-efficient and robust under heavy workloads than the traditional silicon chemistry, but it's more implant-intensive, which creates a direct tailwind for Axcelis' business.

AI chips also present a growing opportunity for Axcelis. Many data center graphics processing units (GPUs) designed by Nvidia come with built-in memory, which requires ion implantation. Plus, computers and devices require increasing dynamic random access memory (DRAM) capacity to run AI software, so manufacturers might have to expand their production facilities, which creates organic demand for Axcelis' equipment.

Preparing for a strong 2025

Axcelis delivered record revenue and earnings during 2023 -- far above its initial expectations -- so topping those results in 2024 was always going to be a challenge.

Axcelis generated $256.5 million in revenue during the second quarter of 2024 (ended June 30). While that crushed management's forecast of $245 million, it still represented a 6.3% drop from the same quarter in 2023. Wall Street expects the company to deliver a little over $1 billion in total revenue for the whole of 2024, a marginal decline from last year.