Why Atomera Stock Surged 22% Higher in June

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What happened

Shares of semiconductor materials licensing company Atomera (NASDAQ:ATOM) increased 22% in June, according to data from S&P Global Market Intelligence. The company reported $400,000 in revenue in the first quarter of 2021 from an advanced development agreement with an unnamed manufacturing customer, but the company’s semiconductor materials tech is still in development. As a result, second-quarter revenue is expected to be nil, and any collected revenue will be highly unpredictable for the foreseeable future.

Nevertheless, chip designers and manufacturers are making progress on smaller and more powerful semiconductors, and there’s no end in sight to the global chip shortage. Atomera could thus find itself with some consistent paying customers within a few years time.

Two researchers working on semiconductors in an office.

Image source: Getty Images.

So what

There was no specific news from Atomera that prompted the rally in shares, although Atomera did suffer along with other high-growth and technology names this past spring. Even after the rebound in June, the stock remains more than 50% below all-time highs notched back in February. 

However, the world’s largest chip fab, Taiwan Semiconductor Manufacturing (NYSE:TSM), continued to report 20% year-over-year revenue growth through the spring. During the first quarter of 2021, TSM said 5-nanometer chip shipments (the smallest and most advanced semiconductors) were 14% of revenue (5-nanometer was still in development the year before) and its next-gen 3- and 2-nanometer development is still on track and should begin production within the next few years.

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Atomera is developing its Mears Silicon Technology (MST) that promises to increase performance and power efficiency of transistors in chips — especially for the smallest and highest-performance chips out there. Progress on 5-nanometer and smaller semiconductors is potentially good news for Atomera’s future monetization of MST.  

Now what

Atomera still isn’t generating meaningful revenue on a consistent basis and will continue to spend on research and development to the tune of a few million dollars every quarter. At the end of March, Atomera had $36.7 million in cash and equivalents, so it isn’t at risk of running out of money anytime soon. But a company with consistent losses and no sales won’t sit well with all investors.

For those investors eyeing Atomera’s potential in the years ahead as semiconductors continue to shrink and require work at the atomic level, this stock is still worth doing a deeper dive on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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