MediaTek Shares Soar on AI Growth Potential
Nvidia Collaboration Fuels Investor Optimism
MediaTek Inc.’s shares are on track to reach a record high in seven months, driven by increased collaboration with Nvidia Corp. on artificial intelligence (AI) technology. The Taiwanese chip designer’s stock climbed to near its June peak this week after announcing a tie-up with Nvidia on an AI personal computer chip.
Diversified Business Set to Drive Growth
MediaTek, known for its key role in handset supply chains, is now well-positioned for the AI tech evolution, according to Robert Mumford, an investment manager at Gam Hong Kong Limited. The company’s projects with Nvidia and expectations for more to come show that MediaTek has great opportunities across a diversified business set.
Smartphone Chips Outlook Improves
An improved outlook for smartphone chips, which account for more than half of MediaTek’s revenue, has driven the consensus estimate for its December-quarter sales up about 5%. While the new PC chip is expected to provide little in terms of near-term sales, overall hopes for the company’s AI-related business are high.
ASICs for Data Centers Hold Promise
Much of the excitement is related to the potential for application-specific integrated circuits (ASICs) for data centers. MediaTek’s expertise in low-power processors, Wi-Fi, and multimedia complements Nvidia’s capabilities well, setting the stage for long-term upside as MediaTek expands into a wider market together with Nvidia.
Analysts Rush to Keep Up with Rally
Bears have retreated on the stock, with no sell ratings since May. Analysts have rushed to keep up with the rally, driving the average price target up 47% in the past year. The shares currently trade at 20 times forward estimated earnings, above the five-year average of 16 times.
MediaTek Leads AI Race with Qualcomm
Compared with US giants, MediaTek is still in discovery mode for most AI momentum flows, according to Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management. Meanwhile, the Taiwanese firm appears to be winning the AI race with handset-chip rival Qualcomm Inc., thanks to its greater mass-market positioning.
Chinese Government Stimulus to Benefit MediaTek
Beijing’s measures, including limited subsidies for purchases of handsets and other smart devices, are expected to benefit MediaTek more than Qualcomm. The company’s Dimensity 8400 for high-end handsets and other chips to be released in the next few months will be key catalysts to watch.
Further AI Tie-Ups with Nvidia Expected
News on further artificial intelligence tie-ups with Nvidia could also drive the shares higher. The next collaboration could be a Windows on Arm AI PC chip at this year’s Computex Taipei trade show in May, according to Morgan Stanley analysts.
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