The recent partnership with Nvidia Corp. has spurred a fresh wave of investor excitement around MediaTek Inc., signaling a potential record high for its shares, a milestone not reached in the past seven months.
This surge in MediaTek’s stock comes on the heels of its announcement to collaborate with Nvidia on developing AI-based chips for personal computers. With this new endeavor, alongside their existing automotive tech alliance, investor expectations are climbing, predicting a continued upward trend, especially considering that the stock price has more than doubled over the last couple of years.
MediaTek, widely recognized for its pivotal role in smartphone supply chains, is now carving a niche in the AI technology sector. Robert Mumford from Gam Hong Kong Limited highlights that MediaTek’s ventures with Nvidia underscore its adaptability and promise across a diversified suite of markets.
While their new involvement in PC chips isn’t set to significantly boost immediate sales due to its niche market, the prospects for MediaTek’s AI-related ventures are high. Mumford points out that the buzz largely revolves around the potential for application-specific integrated circuits, or ASICs, tailored for data centers.
According to analysts at BofA Securities, including Brad Lin, MediaTek’s strengths in low-power processors and multimedia are a natural complement to Nvidia’s offerings, setting the stage for significant long-term growth in broader markets.
Investor sentiment towards MediaTek stocks has improved noticeably, with no sell ratings since May and an upward revision in the average price target by 47% over the past year. Presently, MediaTek’s shares are trading at 20 times forward estimated earnings, outpacing its five-year average of 16 times. This figure is higher than the 19 times for Taiwan Semiconductor Manufacturing Co., though considerably lower than the 30+ multiples observed for giants like Nvidia and Broadcom Inc.
Despite being in what Xiadong Bao from Edmond de Rothschild Asset Management describes as a “discovery mode” compared to U.S. giants in AI, MediaTek appears to be outpacing its competitors like Qualcomm Inc. in the race within the AI sector.
Moreover, MediaTek is expected to gain from China’s government incentives due to its strong presence in the mass market, putting it in a preferable position over competitors like Qualcomm, especially with Beijing’s subsidies for smart device purchases.
Looking ahead, key developments such as the launch of the Dimensity 8400 and other high-end handset chips could be crucial for MediaTek’s market trajectory, says Phelix Lee from Morningstar Inc. Additionally, any updates on further AI collaborations with Nvidia are likely to give a boost to MediaTek’s stock.
Morgan Stanley analysts, including Charlie Chan, suggest that another potential collaboration involving a Windows on Arm AI PC chip at an upcoming Computex trade show in Taipei could act as a significant incentive, given the potential volume in the AI PC segment.
In the tech sector, notable updates include an investment by the venture capital firm 8VC, backed by Joe Lonsdale, in Epirus Inc., a startup specializing in drone detection and interception. Moreover, video-game influencers are making a comeback to Amazon’s Twitch after the end of high-value exclusive streaming contracts. Meanwhile, tech titans like Alphabet Inc. and Meta Platforms Inc. are experiencing fresh investor demands for clarity on how their data might be leveraged in AI model training.
