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China just threw a curveball in the artificial intelligence (AI) race. DeepSeek, a one-year-old Chinese startup, has challenged the reign of several U.S. AI giants with its latest model, R1, which can match OpenAI’s, Google’s (GOOGL), or Meta’s (META) top-tier AI models, all while using less advanced chips and consuming far less energy. This latest development has sparked major panic among investors, with AI king Nvidia (NVDA) suffering a massive $600 billion loss in market value in a single day.
But DeepSeek is just the tip of the iceberg. With a growing army of tech innovators and a bold plan to lead the industry by 2030, China is racing to outpace the U.S. in the battle for technological supremacy. In fact, China is going all-in on AI, launching a 60-billion-yuan ($8.2 billion) investment fund just last month, a move that came right after the U.S. tightened chip export restrictions. But the push goes beyond funding.
The country is also rapidly expanding its semiconductor industry, rolling out talent programs, subsidies, and AI-focused education initiatives to build a self-sufficient tech ecosystem. With AI academies in the works and AI education making its way into schools, China is laying the groundwork to lead the next era of AI. That said, one stock that could emerge as a major winner from this shifting landscape is ACM Research (ACMR).
In a recent bullish call, hedge fund Kerrisdale Capital highlighted ACM Research as a compelling way to play the AI-driven semiconductor boom in China. The company specializes in advanced wafer cleaning equipment, a critical part of semiconductor manufacturing, and has seen strong revenue growth in recent years. With its primary operations in Shanghai, ACM Research is strategically positioned to benefit from China’s push to expand its semiconductor capabilities and reduce reliance on Western technology. Here’s a closer look at this name.
About ACM Research Stock
ACM Research (ACMR), based in California but primarily operating in China, designs, manufactures and sells cutting-edge semiconductor process equipment, specializing in critical areas like single-wafer and batch wet cleaning, electroplating, stress-free polishing, vertical furnace processes, Track, and PECVD. These technologies play a pivotal role in advanced semiconductor device manufacturing and wafer-level packaging.
Committed to excellence, ACM delivers customized, high-performance, and cost-effective solutions that empower semiconductor manufacturers to streamline multiple production steps, enhancing both productivity and product yield in the rapidly evolving tech landscape. Valued at around $1.3 billion by market cap, shares of ACM are up almost 30% so far in 2025, dwarfing the broader S&P 500 Index’s ($SPX) 2% gain on a YTD basis.
The company also appears to be a compelling choice from a valuation perspective. Despite its strong YTD performance, the stock is trading at just 20.76 times forward earnings and 1.81 times sales, both of which are below the sector medians and well under its five-year averages. This combination of solid growth prospects and attractive valuation positions ACM as a potential bargain for investors looking to capitalize on future gains.
A Closer Look at ACM Research’s Financials
ACM Research shattered expectations with its third-quarter earnings report on Nov. 7, delivering standout growth across the board. Revenue surged a notable 21% year over year to $203.9 million, easily outpacing analysts’ forecast of $193.4 million. Even more impressively, adjusted earnings per share soared to $0.63, reflecting a 10.5% annual increase and crushing Wall Street’s projections by an eye-catching 68.8%
On the liquidity side, the company maintained a solid cash position, with cash, cash equivalents, restricted cash, and short- and long-term time deposits rising to $369.1 million as of Sept. 30, 2024. This represents a slight increase from $366.8 million at the end of the prior quarter, showcasing prudent capital management.
Additionally, the company’s Jan. 14 announcement brought a fresh boost to its fiscal 2024 outlook. Management now expects full-year revenue to land between $755 million and $770 million, a solid upgrade from the prior forecast of $725 million to $745 million shared in its Q3 earnings release. ACM is also setting its sights on a strong fiscal 2025, projecting full-year revenue to range between $850 million and $950 million.
This outlook factors in international trade policies, key customer spending trends, supply chain constraints, and the timing of first-tool acceptances, all shaping the company’s growth trajectory for the year ahead. Furthermore, management remains highly optimistic even as geopolitical dynamics remain in flux. CEO Dr. David Wang expressed confidence in sustained investment from mainland China customers, particularly in expanding production capacity, with additional tailwinds from new products like single-wafer SPM, Tahoe, and Furnace.
Despite recent U.S. export restrictions, the CEO views the impact on ACM Shanghai’s tool production as manageable. Wang further noted that ACM remains focused on innovation, developing world-class tools to drive expansion beyond mainland China, an area he expects to play an increasingly significant role in the years ahead.
Kerrisdale Capital’s Bullish Bet on ACM Research
On Jan. 30, shares of ACM took off more than 17% after the company earned a bullish evaluation from Kerrisdale Capital, which identified the semiconductor equipment company as an emerging high-growth opportunity and a “long idea.”
Kerrisdale Capital’s report shines a spotlight on ACM Research as China’s leading supplier of wafer cleaning tools, playing a pivotal role in the country’s drive to expand its semiconductor manufacturing capabilities. The report revealed how the company has experienced explosive growth, with revenue soaring tenfold in the last six years, thanks to China’s strategic response to U.S. export restrictions that have limited semiconductor technology flow into the country.
As U.S. restrictions tighten, Kerrisdale envisions ACM emerging as a formidable rival to established global wafer fabrication equipment giants, capitalizing on China’s increasing need for homegrown wafer fabrication equipment solutions. The report further emphasized ACM Research’s strategic foothold in China, positioning the company for rapid expansion not just locally, but globally.
As the company expands its market share, ACM Research is expected to see significant upside potential, with the report projecting its market cap could exceed $10 billion. Furthermore, Kerrisdale argues that ACM Research’s valuation doesn’t accurately reflect its worth, especially given its 82% ownership of the Shanghai-listed subsidiary. With such a significant undervaluation in the U.S. market, Kerrisdale views ACM Research as a prime opportunity for long-term growth, positioning it as a stock to keep a close eye on.
What Do Analysts Expect for ACM Research Stock?
Overall, Wall Street also remains optimistic about ACMR stock, maintaining a consensus rating of “Moderate Buy.” Of the seven analysts offering recommendations, four advise a “Strong Buy,” one suggests a “Moderate Buy,” and the remaining two analysts maintain a “Hold.” The average analyst price target of $29.83 indicates 45.8% potential upside, while the Street-high price target of $38 suggests that ACMR could rally as much as 85.7% from here.
