AI Infrastructure And Advanced Nodes Will Drive Long-Term Opportunity For This Materials Licensing Business

Catalysts

About Atomera

Atomera develops and licenses materials engineering technology that improves semiconductor performance, power efficiency and reliability for leading chip manufacturers.

What are the underlying business or industry changes driving this perspective?

• Escalating demand for power efficient AI infrastructure and data centers is pushing chipmakers to adopt material innovations like MST to cut power loss and improve thermal performance. This can drive higher licensing volume and recurring royalty revenue as designs move into production and scale across foundries.
• Industry wide transition to new transistor architectures such as Gate All Around and advanced memory nodes is creating integration challenges. MST has already demonstrated it can address these challenges through reduced contact resistance and better channel reliability, positioning Atomera to participate in future high value nodes that can materially expand long term earnings power.
• Increased focus on heterogeneous device types, including RF-SOI, gallium nitride power devices and smart power platforms, aligns with Atomera’s MST starting wafer strategy, which has shorter qualification cycles and fewer process changes. This offers a faster path to initial licenses and earlier revenue recognition relative to mid flow integrations.
• Growing complexity and cost of traditional scaling is driving large OEMs and IDMs to partner earlier with specialty materials providers. Atomera’s strategic collaboration with a leading capital equipment company increases its customer access and credibility, improving the odds of design wins that can meaningfully improve future revenue visibility and gross margins.
• Broader investment in next generation applications such as quantum computing, AI server power, high bandwidth memory and advanced optical networking is expanding the addressable market for MST enabled materials. Even a small conversion rate across the dozen early initiatives Atomera is pursuing could create a step change in license breadth, operating leverage and long term earnings growth.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Atomera's revenue will grow by 289.5% annually over the next 3 years.
• Analysts are not forecasting that Atomera will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Atomera's profit margin will increase from -53700.0% to the average US Semiconductor industry of 14.7% in 3 years.
• If Atomera's profit margin were to converge on the industry average, you could expect earnings to reach $329.8 thousand (and earnings per share of $0.01) by about December 2028, up from $-20.4 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 710.8x on those 2028 earnings, up from -3.9x today. This future PE is greater than the current PE for the US Semiconductor industry at 37.6x.
• Analysts expect the number of shares outstanding to grow by 3.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.44%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The termination of MST integration in STMicroelectronics’ BCD110 platform, despite validated performance gains, shows that even successful technical results can be sidelined when customers reprioritize roadmaps or face schedule pressure. This could limit Atomera’s ability to translate engineering wins into meaningful royalty revenue and delay top line growth and operating leverage on earnings.
• Many of Atomera’s most lucrative opportunities are in long-cycle, advanced nodes such as Gate-All-Around logic, DRAM and complex power devices. Customers in these areas demand extensive validation and multiple learning cycles, so any industry slowdown, technology pivot or prolonged qualification could push out first production licenses for years and prolong net losses and negative earnings.
• The company continues to post rising operating expenses and widening net losses while funding R&D, demo wafers and external collaborations, and is relying on at-the-market equity issuance to bolster its cash balance. This risks ongoing shareholder dilution and pressure on per share earnings and may constrain future margins if revenue ramps more slowly than costs.
• Atomera’s model depends on broad customer adoption across multiple segments, yet engagements remain concentrated in a limited set of large manufacturers and early stage initiatives. The loss, deferral or underperformance of even a few key programs in RF-SOI, GaN or memory could materially reduce expected licensing breadth, slow revenue growth and keep gross margin volatile and negative.
• Although the semiconductor industry is entering a new materials innovation cycle and MST is being explored for high growth areas like AI infrastructure, quantum computing and high bandwidth memory, competing process and materials solutions or customers’ preference for in house approaches could capture these secular tailwinds instead. This would limit Atomera’s share of the value created and cap long term revenue, net margin expansion and earnings potential.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $5.0 for Atomera based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $2.2 million, earnings will come to $329.8 thousand, and it would be trading on a PE ratio of 710.8x, assuming you use a discount rate of 10.4%.
  
• Given the current share price of $2.51, the analyst price target of $5.0 is 49.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.