Did You Miss Out on Nvidia and Micron Technology? This Super Semiconductor Stock Could Soar Over the Next Few Years.

Many investors who want to profit from the artificial intelligence (AI) data center spending boom are still piling into Nvidia and Micron Technology. I don't blame them, considering Nvidia stock is up 900% over the past five years, while Micron stock has soared by a whopping 1,300%. However, the best returns going forward might come from downstream suppliers of semiconductor equipment and components.

Meet Cohu (NASDAQ: COHU). It supplies testing and handling machines that play a central role in the quality control process by ensuring chips are fit for purpose and defect-free before shipping to customers. The company had a market capitalization of just $3.2 billion as of the market close last Friday, Sept. 25, but here's why I predict it will soar in value over the next few years.

Image source: Getty Images.

Cohu is rapidly increasing its production capacity

Cohu supplies equipment to some of the world's largest semiconductor fabrication companies, including Taiwan Semiconductor Manufacturing, Intel, and Samsung. AI could be one of the company's most valuable opportunities ever, particularly for its Eclipse and Neon product platforms.

Eclipse handles the most important data center chips used in AI workloads, including graphics processing units (GPUs), central processing units (CPUs), and high-bandwidth memory (HBM). The machine autonomously picks up finished semiconductors straight after the production process, and places them in test sockets that simulate real-world conditions to determine if they function as intended. Automation is critical in this testing process, because a human-driven alternative would materially slow down production.

The Neon inspection and metrology platform, on the other hand, analyzes the physical condition of memory chips. It uses AI software and infrared vision to identify microscopic cracks and other imperfections in semiconductor wafers, to ensure chips are clear of defects before shipping to customers. Neon can see defects as small as 1 micron, which are completely invisible to the human eye. For context, the average human hair is 70 microns thick.

Demand is surging for both product platforms thanks to the AI boom. In fact, Cohu is working to double production capacity at its flagship facilities in Malaysia by the end of 2026, and plans to increase it even further in 2027.

Accelerating revenue growth

According to Wall Street's average estimate (provided by Yahoo! Finance), Cohu's total revenue is on track to grow by 35% to $612 million in 2026. That would represent a significant acceleration from the 13% growth the company delivered in 2025, highlighting the strength of the AI tailwind.

But Cohu's results could improve even further, because the company has an $850 million sales pipeline from what it calls the high-performance computing segment, which primarily includes customers in the AI semiconductor manufacturing industry. And that pipeline is growing, because it was worth $750 million earlier in the year.

None of that money has appeared in Cohu's financial statements yet, because the customers are still in the engagement and qualification phase of the sales process. That means shareholders could see a significant jump in the company's revenue in the future.

Cohu stock isn't cheap, but there could be plenty of upside ahead

Cohu stock has already soared by a whopping 188% this year, but I think investors who take a long-term view of at least five years can still earn blistering returns. However, the company is a bit tricky to value because it isn't consistently profitable, which makes it appear quite expensive at first glance.

Wall Street thinks Cohu is on track to deliver adjusted (non-GAAP) earnings of $0.95 per share in 2026, placing its stock at a forward price-to-earnings (P/E) ratio of 70.5. For some perspective, Nvidia stock currently has a P/E ratio of just 28.4.

With that said, Wall Street predicts Cohu will almost double its adjusted earnings to $1.85 per share in 2027, placing its stock at a far more attractive forward P/E of 36.2. It still isn't necessarily a bargain at that valuation, but the trajectory of the company's earnings could support further upside in its stock, especially if equally bullish 2028 and 2029 forecasts start rolling in. There is some evidence they will, based on the enormous (and growing) sales pipeline I highlighted earlier.

As a result, investors who are looking for opportunities in the AI infrastructure space beyond mainstream stocks like Nvidia and Micron might want to consider adding Cohu to their portfolios.

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