An overlooked player in data center buildout delivers once again
Shares of AI play Qnity are back on the rise after another excellent quarter and upbeat outlook. We see plenty of room to run for the semiconductor industry supplier. Revenue in the second quarter increased 22.1% from a year ago to $1.43 billion, outpacing the $1.36 billion expected by LSEG. Adjusted earnings per share (EPS) surged 52.6% year over year to $1.19, also outpacing the consensus estimate of $1.06, according to LSEG. Q 1Y mountain Qnity 1-year stock performance Bottom line It has been a wild ride for Qnity investors over the past month and a half. After hitting an all-time closing high of around $176 on June 22, the stock nosedived nearly 30% over the next five weeks before bottoming out at about $123 on July 29, as the market turned on stocks tied to the data center buildout. We stepped in to buy shares last Thursday at just under $135 apiece, spurred in part by news that an AI-focused hedge fund was forced to unwind its public positions, which we viewed as a positive indicator for the group. It was the right move, given Qnity’s strong results this morning, the company’s third quarter since spinning off from DuPont in November. Not only did results outpace expectations on both the top and bottom lines, but we also got a boost to full-year guidance as demand for AI chips is driving demand for the key fabrication inputs that Qnity provides. The company, which provides chemicals and other specialized materials used to manufacture semiconductors and to package them in increasingly complex ways, has two operating units: The Semiconductor Technologies segment helps its customers build computer chips and electronic devices, while Interconnect Solutions addresses performance challenges, including power efficiency, heat management, signal integrity, and long-term reliability. Interconnect Solutions is where the demand for packaging shows up. Key customers include leading chip manufacturers TSMC , Samsung, and SK Hynix. Management’s commentary further reinforced our conviction that Qnity will continue to benefit from the AI boom. It is also well-positioned to grab more market share as demand for AI chips and interconnect solutions moves beyond the cloud and into the physical world of devices, vehicles, and machines. As CEO John Kemp noted on the call, “Increasingly, we see AI moving from the cloud into the physical world of devices, vehicles and machines. If the cloud is where AI learns to think, the physical world is where AI will learn to do. This presents another exciting long-term growth opportunity for Qnity.” Given the quarter’s strength and outlook, we reiterate our 1 rating and price target of $180. Why we own it Qnity is a key supplier of chemicals and materials used in semiconductor and electronics manufacturing. The more chips and electronic devices are built, the greater the demand for Qnity’s products. Competitors : Entegris , MKS , Element Solutions Most recent buy : July 30, 2026 Initiated : The Club received Qnity shares in the DuPont spin-off in late 2025. Guidance Management raised its targets for the full year 2026 across the board: Sales of $5.55 to $5.65 billion, a $300 million increase at the midpoint and ahead of the $5.37 billion consensus estimate at the midpoint, according to LSEG. Adjusted operating EBITDA of $1.675 to $1.725 billion, a $120 million increase at the midpoint and above the $1.626 billion consensus estimate, according to FactSet. Adjusted earnings of $4.40 to $4.60, a 53-cent increase at the midpoint and ahead of the $4.14 billion consensus estimate, according to LSEG. Adjusted free cash flow of $600 to $700 million, a $100 million increase at the midpoint and above the $432 million consensus estimate, according to FactSet. Quarterly results Qnity delivered its ninth consecutive quarter of profitable growth, a streak that dates back to the company’s days under the DuPont umbrella. The one blemish was a miss on operating EBITDA margin in the Semiconductor Technologies segment, which led to the overall EBITDA margin coming up short. The unit is home to products used directly in the complex process of making semiconductors. It also covers the materials used in certain TV screens and other electronic displays. While not ideal, management pointed to three catalysts for revenue growth — strong demand, a favorable shift toward more advanced nodes, and better fab utilization rates — and that matters more to investors than slight margin weakness resulting from sales mix and investments that should support future earnings. “As customers move to increasingly advanced nodes, every wafer requires more layers, more processing complexity, and more packaging steps,” Kemp said. “All of this translates to more volume and to more Qnity content.” That combination of improving utilization and rising content intensity “continues to support our confidence in the long-term growth outlook for our semi business.” The Interconnect Solutions segment benefited from 50%-plus year-over-year growth across its products and services, which are more closely aligned with advanced packaging and thermal management. The complexity of AI chips is driving demand for both processes. And, as the name suggests, this segment is also involved in manufacturing the “interconnect” products that connect the various parts of the data center. AI is also boosting demand there. One of the biggest challenges to manufacturing next-gen AI systems isn’t just building smaller and faster chips, but ensuring they communicate reliably, Kemp said. That’s increasingly difficult as chips become smaller and new solutions are needed to address signal integrity, power delivery, and heat dissipation. That’s where Qnity steps in. “We are seeing demand broaden across our portfolio and additional opportunities to increase content throughout the AI ecosystem moving forward.” (Jim Cramer’s Charitable Trust is long Q. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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