MediaTek Inc.’s increased collaboration with Nvidia Corp. has ignited investor optimism over the Taiwanese chip designer’s potential in the rapidly growing artificial intelligence (AI) sector, propelling its stock to near-record highs. The recent announcement of a joint venture to develop an AI-powered personal computer chip has driven the company’s shares to levels just shy of their June peak, marking a strong rally after more than doubling in value over the past two years.
The announcement further cements MediaTek’s role in shaping the future of AI, alongside its existing partnership with Nvidia in automotive technologies. According to Robert Mumford, investment manager at Gam Hong Kong Limited, MediaTek is now “very well positioned for the AI tech evolution.” He noted that the collaboration with Nvidia and the expanding opportunities across various sectors show the company’s strong potential beyond its traditional focus on smartphone chips.
While MediaTek is primarily known for its key role in supplying chips for mobile devices, its AI ventures have generated fresh excitement among investors. The company’s revenue from smartphone chips, which still accounts for more than half of its earnings, has also seen an uplift, contributing to an upward revision of the consensus estimate for its December-quarter sales by about 5% in recent months.
Despite expectations for the new AI PC chip to contribute minimally in terms of near-term sales, particularly due to its niche customer base, analysts are highly optimistic about MediaTek’s AI prospects. According to BofA Securities analysts, including Brad Lin, MediaTek’s expertise in low-power processors, Wi-Fi, and multimedia technologies complements Nvidia’s capabilities, positioning it for long-term growth in the AI sector.
Investor sentiment surrounding MediaTek has significantly improved, with no “sell” ratings on the stock since May. Analysts have increased their price targets for the company by an average of 47% over the past year, reflecting growing confidence in its future prospects.
As investor enthusiasm grows, MediaTek shares are now trading at 20 times forward earnings, surpassing its five-year average of 16 times. While this is higher than the 19 times forward earnings of Taiwan Semiconductor Manufacturing Co. (TSMC), it remains below the 30+ times multiples seen for U.S. giants like Nvidia and Broadcom Inc.
Fund manager Xiadong Bao of Edmond de Rothschild Asset Management noted that MediaTek is still “in discovery mode” compared to its U.S. counterparts, but its increasing focus on AI technology is helping it gain an edge over handset-chip rival Qualcomm Inc. Additionally, Bao believes MediaTek stands to benefit from Chinese government stimulus measures, which favor its more mass-market positioning relative to Qualcomm.
Analysts are particularly focused on upcoming product launches, such as MediaTek’s Dimensity 8400 chip for high-end smartphones, expected in the next few months. Another potential catalyst could come from future AI collaborations with Nvidia, with Morgan Stanley analysts speculating that a new AI chip for Windows on Arm PCs could be unveiled at the Computex trade show in Taipei this May.
As MediaTek strengthens its foothold in the AI landscape, the stock’s positive momentum is set to continue, driven by its expanding product portfolio and further collaborations with Nvidia.
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