What Happened?
Shares of power management chips maker Monolithic Power Systems (NASDAQ:MPWR) jumped 16.3% in the afternoon session after the company reported strong fourth-quarter results and provided revenue guidance for the next quarter that exceeded analysts' expectations. Growth was led by a 51.2% surge in Enterprise Data sales and a 43% increase in Automotive revenue, reflecting strong demand for AI-related power management and advanced driver assistance systems. The bottom line also improved as its EPS outperformed Wall Street's estimates. Overall, we think this was a solid quarter with some key areas of upside.
Is now the time to buy Monolithic Power Systems? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Monolithic Power Systems’s shares are very volatile and have had 21 moves greater than 5% over the last year. But moves this big are rare even for Monolithic Power Systems and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 24.9% on the news that Edgewater Research analysts revealed that the company's (MPWR's) allocation to Nvidia's Blackwell line of GPUs is "at risk." The analysts added, "We hear NVDA will go through their confirmed orders to MPWR for the next few quarters, but we hear NVDA has canceled half of MPWR's backlog, cutting all of their unconfirmed orders."
Edgewater Research noted that the root cause of MPWR's issue is "unclear" but could be related to some product issues identified earlier in the year. As a result, the analysts think the situation creates a risk to MPWR's business, especially its Enterprise data segment, given investors' high hopes for the company's AI capabilities.
Monolithic Power Systems is up 19.9% since the beginning of the year, but at $712.24 per share, it is still trading 24.8% below its 52-week high of $947.16 from August 2024. Investors who bought $1,000 worth of Monolithic Power Systems’s shares 5 years ago would now be looking at an investment worth $3,952.
Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.