(Bloomberg) — Increased collaboration with Nvidia Corp. has pushed investor optimism over the AI growth potential for MediaTek Inc. to a recent level, putting its shares heading in the right direction for his or her first record high in seven months.
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The stock climbed to inside a whisker of its June peak this week after the Taiwanese chip designer announced a tie-up with Nvidia on an AI laptop computer chip. On top of the businesses’ existing partnership in automotive tech, the news helped fueled expectations for further gains within the shares after they greater than doubled previously two years.
Known more for its key role in handset supply chains, MediaTek is now also “thoroughly positioned for the AI tech evolution,” said Robert Mumford, an investment manager at Gam Hong Kong Limited. The projects with Nvidia and expectations for more to come back show that “MediaTek has great opportunities across a diversified business set,” he added.
MediaTek can also be benefiting from an improved outlook for smartphone chips, which still account for greater than half of its revenue. This helped drive the consensus estimate for MediaTek’s December-quarter sales up about 5% over the past few months, Bloomberg-compiled data show.
While the brand new PC chip is predicted to offer little by way of near-term sales given its area of interest customer group, overall hopes for the corporate’s AI-related business are high. Mumford said much of the joy is said 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,” BofA Securities analysts including Brad Lin wrote in a note. “This sets the stage for long-term upside as MediaTek expands right into a wider market along with Nvidia.”
Bears have retreated on the stock, with no sell rankings since May. Analysts have rushed to maintain up with the rally, driving the typical price goal up 47% previously yr.
Reflecting the growing positive sentiment, the shares currently trade at 20 times forward estimated earnings, above the five-year average of 16 times. That’s costlier than the 19 times for key foundry Taiwan Semiconductor Manufacturing Co., nevertheless it pales next to the 30+ multiples for the likes of Nvidia and Broadcom Inc.