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Measure Twice, Buy This Stock Once
Noah Zelvis
September 27, 2025
If you want to know where chips are headed, watch the tools that measure them.
This company doesn’t etch, deposit, or implant, it tells fabs whether those steps worked, in real time. We think it looks headed for higher highs.
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Why This Name Is Suddenly On Everyone’s Screen
Nova Ltd. (NASDAQ: NVMI) is the metrology-and-process-control pure-play most investors only learn about after it’s already had a run.
And what a run. With shares around $311, the stock is up ~53% year to date, flirting with a new 52-week high ($320) and a ~$9.2B market cap.
The fundamentals aren’t hand-wavy, either.
Q2 revenue hit ~$220M (+40% YoY), with non-GAAP EPS of ~$2.20 ahead of expectations, reflecting strong demand across leading-edge logic and memory.
Gross margins in the high-50s and net margins in the mid-20s underline that this isn’t a sell tools at cost, hope on service model.
Under the hood, three structural tailwinds are doing the heavy lifting:
Shrinking geometries = rising metrology intensity. GAA transistors, backside power, EUV multi-patterning… every new knob fabs turn creates more steps to verify. More steps to verify means more Nova.
AI servers and HBM = inspection everywhere. Advanced packaging (chiplets, 2.5D/3D), thick stacks of HBM DRAM, and wafer-to-wafer bonding push defect discovery and overlay control to center stage.
Geographic diversification of capex. U.S./EU/India fabs plus traditional Asia capacity broaden the customer map beyond one or two megaspenders.
Action (Core-quality angle): For long-only portfolios seeking durable secular exposure to AI/advanced nodes without picking winners among CPU/GPU vendors, NVMI is a credible add on pullbacks. |
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What Nova Actually Does (And Why It Matters Now)
Think of a cutting-edge fab as a 1,000-step recipe where any mis-measurement ruins the cake.
Nova’s optical and x-ray metrology platforms (plus analytics) provide nanometer-scale readouts on film thickness, critical dimensions, sidewall angles, and material composition, without destroying the wafer.
Two things make that powerful in 2025:
Hybrid metrology workflows. Fabs increasingly combine multiple measurement modalities and feed them into software models that flag tiny drifts fast.
That plays to Nova’s hardware+software strengths, and it’s precisely where value accrues as complexity rises.Feedback speed. Cycle time kills yield. Rapid, in-line measurements that close the loop on process tools mean fewer bad wafers, higher utilization, happier CFOs.
If your capex is in the tens of billions, this matters more than ever.
Add in Nova’s diversified customer roster across foundry/logic and memory (plus packaging), and you get a business that can keep shipping even when one sub-segment slows.
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The Investment Case: Quality Growth At A Premium
Momentum is real. Back-to-back record revenue, high-end-of-guide deliveries, and EPS beats point to strong execution.
The stock’s price (P/E ~42) is not cheap, but it rarely is at this stage of a wafer-fab upcycle.AI/HBM is a multi-year story. AI datacenter servers are a stack: cutting-edge logic on advanced nodes plus ultra-high-bandwidth memory plus complex packaging.
Each layer multiplies measurement points.Mix and moat. Metrology sits in the must-have lane of process control. It’s sticky, spec-driven, and embedded in customer recipes, and switching costs are high once a tool is qualified.
Action (Momentum with guardrails): If you already hold NVMI, trail a 10–12% stop from highs and let it run into year-end catalysts (customer capex updates, HBM capacity expansions). |
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What Could Push It Higher (Near-Term Catalysts)
HBM capacity adds: Any incremental HBM line expansions at major DRAM makers are a direct metrology tailwind.
Advanced packaging ramps: Chiplet and 2.5D/3D scaling (interposers, hybrid bonding) increases the inspection surface area.
Node transitions sticking the landing: Smooth 3nm volume ramps and 2nm pilot lines mean more process steps to verify, Nova’s sweet spot.
Software/analytics attach: Higher-margin software and hybrid-metrology wins can nudge gross margin up and stabilize earnings through the cycle.
The Bear Case: This Is Still Semicap
Let’s pressure test the long:
Cyclicality lives here. Wafer-fab equipment cycles are brutal. If foundry/logic pauses orders or DRAM hits an inventory air pocket, even must-have metrology flinches.
Customer concentration. A few hyperscale-exposed fabs drive a lot of leading-edge spend. Any timing shift by a top-3 customer shows up in Nova’s bookings.
Valuation premium. At ~42x trailing earnings, you’re paying for execution. A single beat but guide merely in-line can compress multiples quickly.
Geopolitics & trade controls. Export restrictions or local content rules can complicate shipments and service in sensitive geographies.
Execution bandwidth. Keeping pace with GAA/backside power and advanced packaging roadmaps is non-negotiable; any stumble in tool readiness could concede share.
What would change our mind: Two quarters of sequential revenue declines and gross margin <55%, or evidence of share loss on a key node/flow. |
Numbers To Watch (Your Trust But Verify List)
Revenue growth: Sustaining 30–40% YoY through the next two quarters would validate the AI/HBM thesis; a step-down to teens suggests a normalizing pace.
Gross margin: ≥57% signals healthy mix and pricing; a drift toward low-50s would hint at discounting or product cost pressure.
Bookings & book-to-bill: >1.1× for two straight quarters confirms demand outpacing shipments.
Software/analytics attach: Any disclosure of rising software contribution or recurring analytics would be a quiet margin engine.
Customer commentary: Listen for: advanced packaging momentum, HBM line adds, and 2nm pilot timing from top customers.
Positioning & Risk Controls
NVMI is a high-quality way to own the more metrology per wafer trend. It’s also a semicap stock near an ATH with a premium multiple. Both can be true.
Sizing: 1–2% makes sense for diversified portfolios.
Entries: Scale in on weakness; avoid full-size buys above fresh highs.
Hedges: Pair with a defensive semicap (service-heavy or installed-base model) if you want to dampen beta through earnings.
Stops: Technical stop ~8–12% below entry or a break of 50-day with volume.
Final Word: The Ruler Of The Yield Curve
Nova doesn’t win by being loud, it wins by being right, at nanometer scale, thousands of times a day.
As AI servers proliferate and packaging complexity explodes, metrology intensity only goes one direction.
If you want leverage to that inevitability, NVMI is a compelling, if cyclical, vehicle. Measure twice, buy once, and let the fabs do the compounding.
Action Recap
✅ Starter 1% below $300; scale to 2% on >30% YoY growth and ≥57% GM
✅ Trail 10–12% stops; buy pullbacks, not breakouts
✅ Watchlist: book-to-bill >1.1×, gross margin ≥57%, packaging/HBM commentary
✅ Catalysts: HBM capacity adds, advanced packaging ramps, next-gen node transitions
✅ Use as a semicap satellite, respect the cycle, but ride the secular metrology tailwind
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider