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It is no secret that artificial intelligence [AI] has been the growth story for the 2020s. The global AI market is expected to grow at a robust pace of 37.3% annually to reach about $1.7 trillion by the end of 2030. One of the main components that makes AI possible is integrated circuits [ICs] (also known as semiconductors or microchips). What is not as well known is a growing company that is likely to benefit from AI growth. Photronics (Nasdaq: PLAB) is one of the behind-the-scenes companies that makes the production of semiconductors possible.

I see Photronics as a solid long-term investment as the stock has an attractive valuation and the company has strong consensus expected earnings growth of about 13% for FY24.

Photronics manufactures photomasks which are used to produce ICs, flat panel displays [FPDs], and to transfer circuit patterns onto microchips. The company is experiencing strong demand for its photomasks as record revenue was achieved for the sixth year in a row.

However, it is worth noting that Photronics stated that there is a current contraction in demand which may last through fiscal Q1 2024. However, the consensus among industry leaders and customers is that demand will be stronger by the mid-point of 2024 or the company's fiscal Q2 & Q3 2024 as the next growth phase begins. The company also stated that photomask demand tends to be less cyclical than the semiconductor industry in general. This gives Photronics some stability in a market that can fluctuate significantly.

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