Investors who keep an eye on the technology sector have probably noticed that companies operating in the artificial intelligence (AI) and semiconductor sectors tend to dominate the news. And for good reason -- both industries promise to play an irreplaceable role in the future by transforming the way we experience everyday life.
AI will automate monotonous tasks and speed up complex ones, and it might even add $200 trillion in output to the global economy by 2030 (according to Ark Invest). And advanced semiconductors are finding their way into every electronic device we use, from our smartphones to our smart refrigerators.
Fortunately, investors are spoiled for choice when it comes to owning a stake in those game-changing technologies. I'm going to share one stock from each industry that I find to be among the most intriguing, especially for the long term.
1. Duolingo: The world's favorite language learning app just got smarter
With more than 500 million downloads and 60.7 million monthly active users, Duolingo (DUOL +4.42%) is the most popular digital language education platform in the world. It takes a mobile-first approach, and it has designed its application to deliver excitement, engagement, and social connection to users -- in other words, it's the direct opposite of a typical classroom experience.
NASDAQ: DUOL
Key Data Points
The Duolingo app is free to use, with a paid subscription option that unlocks additional features for learners who want to fast-track their success. That monetization strategy has been incredibly successful; 7.8% of Duolingo's monthly active users were paid subscribers at the end of 2022, up from 6.2% a year ago. But it's about to get even better.
Duolingo has been investing in artificial intelligence since 2013, but with more recent help from ChatGPT creator OpenAI, the company's efforts in the space were just taken up a notch. It's set to unveil a new, more expensive subscription tier called Duolingo Max, which will introduce two features: Explain My Answer and Roleplay.
Both are designed to serve as a human-like tutor for users. Explain My Answer will offer personalized feedback on users' mistakes as they complete lessons, and Roleplay will enable them to practice their conversational skills through an AI-powered chatbot.
Duolingo was one of the very few tech companies to consistently increase its revenue forecasts last year, and it ended up bringing in $369.5 million, growing by 47% compared to 2021. It remains the highest-grossing mobile app in the education category in both the Apple App Store and Alphabet's Google Play Store.
Its brand-new AI-powered features will transform the learning experience, and they have the ability to supercharge its financial results -- adding to the incredibly strong existing momentum. It's little wonder Duolingo stock has soared 92% in 2023 already, and it's probably not done.
2. Axcelis Technologies: Outperforming even when the chips were down
Between 2020 and 2022, the semiconductor industry went on a rollercoaster ride -- it experienced the highs from supply shortages with surging demand during the worst of COVID-19, followed by the lows from oversupply and a declining economy last year. But semiconductor service company Axcelis Technologies (ACLS +1.25%) remained strong throughout.
NASDAQ: ACLS
Key Data Points
After a brutal stock market decline over the last 18 months, there aren't many companies trading near an all-time high valuation. Axcelis is, though. Investors have continued to support the stock because its underlying business exceeded revenue expectations in 2022, almost doubled its profit, and reported a record-high order backlog.
The company makes ion implantation equipment, which is critical to the chip fabrication process, so when semiconductor manufacturers want to expand their production capacity, they need Axcelis' products to do so. Hence, the value of its order backlog is currently $1.1 billion -- that's greater than the $920 million in revenue the company generated in the whole of 2022!
Axcelis' earnings per share came in at $5.46 for the year, so despite its stock price tripling over the last two years, it still trades at a price-to-earnings (P/E) ratio of just 23.1, which is a 12% discount to the 26.2 P/E of the Nasdaq-100 technology index.
The semiconductor industry is set for major growth for the rest of this decade, and it could become a $1.5 trillion market in 2030. That bodes well for Axcelis, and in the short term, its order backlog should help its revenue remain in growth territory. Investors might want to add Axcelis stock to their portfolio at the current price or watch it closely at the very least.
