Camtek's Q1 2024 earnings call [1] was a symphony of record-breaking numbers, bullish projections, and a palpable excitement surrounding the burgeoning AI market. HBM, the memory architecture powering this AI revolution, dominated the conversation, accounting for a staggering 40% of the company's revenue. But amidst the fanfare, a subtle detail emerged, one that may have slipped past the keen eyes of most analysts - the explosive rise of chiplets.

While HBM rightly stole the limelight, with its revenue share doubling quarter-over-quarter and overshadowing even the most optimistic projections, the unassuming chiplet quietly carved its own path to success. Camtek revealed that chiplet modules constituted a significant 20% of Q1 revenue, a figure that speaks volumes about the rapidly expanding chiplet landscape.

The significance of this 20% figure becomes even more apparent when compared to HBM's previous trajectory. Just a year ago, HBM represented a single-digit percentage of Camtek's revenue. Chiplets, though not explicitly detailed in previous reports, likely held a similarly minuscule share. To witness a leap to 20% in just one year indicates an unprecedented growth rate, potentially mirroring or even exceeding that of HBM.

This begs the question is the market underestimating the chiplet opportunity? While HBM acts as the high-bandwidth memory feeding the AI engine, chiplets are the intricate building blocks constructing that very engine. As AI applications become more complex and demanding, requiring even greater processing power, the demand for these chiplet modules will inevitably skyrocket.

Camtek's deep entrenchment in this market further fuels this hypothesis. They supply to the "two major players" in the chiplet space, essentially encompassing the entire market. This privileged position, coupled with the company's commitment to continuous innovation and collaboration with Tier 1 customers on future roadmap development, positions Camtek at the forefront of this chiplet surge.

Furthermore, Moshe Eisenberg, Camtek's CFO, subtly hinted at another critical catalyst for future growth - new product lines with "improved gross margins." While details remain under wraps, these forthcoming releases could further enhance Camtek's competitive edge and amplify its share within the rapidly expanding chiplet market.

Projected Revenue Growth

Assuming a conservative 25% annual growth rate for both HBM and chiplets (already lower than the projected 20%-30%), and a modest 5% growth for the remaining segments, Camtek's revenue from these two key areas could surpass $300 million in 2025. This alone would represent a near doubling of the company's 2023 revenue, even before factoring in contributions from FRT and the newer platforms.

The potential is undeniable. If the chiplet market continues on its current trajectory, Camtek could find itself at the heart of an AI-powered boom, mirroring the meteoric rise of companies like Nvidia. While the long-term picture remains subject to market dynamics and global economic conditions, the current indicators point towards an exhilarating journey for Camtek and its investors, fueled by the intertwined forces of HBM and the often-overlooked chiplet.

"Fun Fact: Did you know that Camtek's technology played a crucial role in the development of the first camera phone? Their inspection equipment ensured the quality and reliability of the early CMOS image sensors, paving the way for the ubiquitous camera phones we use today. Perhaps this early foray into a game-changing technology foreshadows the company's current success in the AI revolution."