"The More Complex Chip Manufacturing Becomes, the More Nova Benefits"

Nova (NASDAQ: NVMI) has surged 15% since its latest earnings report last week and is now up 38% year-to-date. The company's latest results showed continued strong demand for its products, as it beat analyst expectations with $194.8 million in revenue and $1.94 EPS, compared to $186.5 million and $1.82 EPS expected. Its guidance also pointed to further demand acceleration—Nova expects $210 million in Q1 revenue, well ahead of the $192 million analysts had forecast.

Nova is currently trading at a forward P/E of 30, higher than competitors like Onto and KLA, which trade at 22-23. However, Nova's growth justifies the premium. As Sergey Vastchenok from Oppenheimer put it: "Nova grew 45% while the entire industry grew just 5%, and this was mostly organic growth."

Beyond the earnings beat and strong guidance, investors were also encouraged by Nova’s move into Gate-All-Around (GAA) transistors, the new chip production method set to replace the existing FinFET technology, which has been the industry standard since 2011. Nova expects to generate $500 million in cumulative revenue from this segment over the next two years, with GAA eventually becoming its primary business segment.

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Additionally, Nova’s advanced packaging segment—which did not exist before 2022—grew 50% in 2024 and now accounts for 15% of total revenue.

In a conversation with Bizportal, Nova CFO Guy Kizner explains how this expansion helps diversify the company’s revenue streams and reduce cyclicality in the semiconductor industry. He also explains why Nova’s China business, which makes up 30% of its revenue, is critical to its strategy and why he believes the DeepSeek AI controversy is actually a positive signal for Nova and the broader chip industry.

Can you expand on Nova’s move into Gate-All-Around (GAA) technology?

"In semiconductors, a chip is an electrical circuit made up of transistors, and within each transistor, there’s a gate that controls electrical flow. As technology advances, there’s a constant need for more efficient, smaller, and faster chips. The way to achieve that is by increasing transistor density.

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"For reference, an iPhone 7 chip had 3 billion transistors, while the latest iPhones now have 20 billion transistors per chip. That level of complexity means manufacturing must be incredibly precise. "GAA is the first major shift in chip manufacturing technology since 2011, and it’s a game-changer."

You guided for $500 million in cumulative GAA revenue over the next two years. How big can this business get beyond that, and when will it become Nova’s core segment?

"As demand for advanced technology grows, so will this segment. Right now, we’re still in the early stages. The industry expects the semiconductor market to expand from $500-600 billion today to $1 trillion by 2030. That’s the engine driving everything, and to support that growth, there will need to be massive investment in fabs and manufacturing."

15% of your revenue already comes from advanced packaging, a relatively new segment for Nova. Do you plan to continue expanding there?

"Before 2022, we had zero exposure to advanced packaging. But we identified it as a high-growth opportunity and made some strategic moves. First, we acquired Ancosys, a German company, in 2022. That gave us our initial footprint in this space. Second, we adapted our existing technology to meet the needs of the packaging industry. As a result, our advanced packaging revenue grew 50% in 2024 and now makes up 15% of total sales. It’s a rapidly growing segment, and we expect further expansion in 2025."

What led you to enter advanced packaging? This space is more aligned with Camtek’s expertise

"Semiconductors are cyclical, so the best way to mitigate that is by diversifying across multiple industry segments. Once we recognized that advanced packaging was set to grow rapidly, and we understood how our technology could fit in, we entered the market. The biggest players—TSMC, Micron, Intel, and others—are investing heavily in this space today. Our recent acquisition of Sentronics also aligns with this trend."

Did you enter advanced packaging because of its growth potential or because Nova has a competitive edge there?

"It’s a mix of both. The specific niche we operate in within advanced packaging doesn’t overlap much with the major players. For example, we have a highly advanced optical metrology solution. By applying that expertise to packaging, we can solve challenges that existing technologies struggle with. So while Camtek, Onto, and others compete in broader packaging applications, we operate in a specialized area where we don’t really face direct competition."

Roughly 30% of Nova’s revenue comes from China. Do you view that as a risk or an advantage?

Are you concerned about tariffs impacting your China business?

"Tariffs aren’t really the issue here. The bigger challenge is the U.S. sanctions aimed at restricting China’s access to advanced chips. That said, most of Nova’s China revenue comes from less advanced technology nodes, so the impact is limited."

The DeepSeek AI storm has been making headlines. On one hand, it has increased chip demand from China, but on the other, does it hurt overall semiconductor sentiment?

"It’s still too early to determine the long-term effects of the DeepSeek situation. The key takeaway is how it affects investment from Western tech giants—and so far, they continue ramping up spending. Overall, any technological advancement in AI is a net positive. Over time, AI development will become cheaper and more profitable, which means demand for semiconductors will only increase."

Right now, all of Nova’s growth engines are firing. What’s your long-term view?

"Nobody knows exactly what the next big technological revolution will be. But if you believe it will be tech-driven, then by definition, it will be powered by semiconductors. That’s what’s fueling our growth and the growth of the entire industry. The more complex semiconductor manufacturing becomes, the more Nova benefits."