Investor optimism surrounding MediaTek Inc. has surged, buoyed by a strengthened collaboration with Nvidia Corp., leading the Taiwanese chip manufacturer to approach its first record high in seven months. The company's shares are remarkably close to their peak reached in June, following the announcement of a partnership to develop an AI personal computer chip with Nvidia. This collaboration adds to their existing relationship in automotive technologies, significantly enhancing expectations for MediaTek’s growth potential within the AI sector.
Robert Mumford, an investment manager at Gam Hong Kong Limited, noted, “MediaTek is now also very well positioned for the AI tech evolution.” He further emphasised that the strategic projects with Nvidia demonstrate MediaTek's capacity for substantial growth across a diversified business landscape. This partnership signifies a pivotal moment for MediaTek, traditionally recognised for its contributions to the handset supply chain, as it ventures into emerging AI technologies.
The company is also experiencing a favourable shift in the smartphone chip market, which currently generates more than half of its total revenue. As a result, the consensus estimate for MediaTek's sales for the December quarter has been raised by approximately 5% in recent months, according to Bloomberg-compiled data.
While the anticipated new PC chip is expected to cater to a niche customer segment and may not yield significant immediate sales, the excitement surrounding MediaTek's AI-related ventures remains high. Mumford highlighted the enthusiasm primarily stems from the potential application-specific integrated circuits (ASICs) tailored for data centres, which could open up new revenue streams.
Analysts from BofA Securities, including Brad Lin, remarked that MediaTek’s strengths in low-power processors, Wi-Fi, and multimedia technologies align well with Nvidia’s existing capabilities. This synergy is poised to present long-term growth opportunities as MediaTek expands its market reach in concert with Nvidia.
The changing sentiment among analysts is evident, as bearish forecasts for the stock have dissipated with no sell ratings since May. To keep pace with the stock’s upward trajectory, analysts have also adjusted their projections, elevating the average price target by 47% over the past year.
In light of this bolstered optimism, MediaTek’s shares are currently trading at 20 times forward estimated earnings, surpassing its five-year average of 16 times. While this valuation is higher than the 19 times seen for prominent foundries like Taiwan Semiconductor Manufacturing Co., it remains lower than the 30+ multiples attributed to Nvidia and Broadcom Inc., signifying the ongoing dynamics within the competitive landscape of the semiconductor industry.
Source: Noah Wire Services