Artificial intelligence (AI) has fueled the returns of many technology stocks in recent years and, in many cases, has caused companies to shift their focus to AI.
That is the case with two AI stocks, Navitas Semiconductor (NVTS 6.73%) and Arm Holdings (ARM 4.26%). These technology companies have moved aggressively into AI infrastructure and captured the attention of investors.
Navitas, a chipmaker, has seen its stock price surge 188% over the past 12 months.
Image source: Getty Images.
Chip designer Arm's stock price is up 13% year to date, but down 21% over the past year. But Arm stands out as the better buy right now. Here's why.
The Navitas 2.0 pivot
Navitas makes gallium nitride chips, which are used in smartphones and consumer electronics. These types of chips are considered more powerful and efficient than traditional silicon chips in those devices. Navitas is one of a handful of leaders in this space.
NASDAQ: NVTS
Key Data Points
However, it is in the process of pivoting toward providing chips for larger power markets like AI data centers, electric vehicles, and certain industrial markets. Leadership calls the pivot Navitas 2.0, as Chris Allexandre, president and CEO, explained last November:
"Navitas' decade-long technology leadership in gallium nitride (GaN), and high-voltage silicon carbide (SiC) strongly positions us to capitalize on these global megatrends. We are executing a strategic pivot from consumer and mobile markets to these fast-growing, more profitable, more sustainable higher-power segments."
Revenue will take a hit, as the firm anticipates just $7 million in revenue in Q4 2025 during this pivot. That's down from $10 million in Q3 and $22 million in the third quarter of 2024. For the year, analysts anticipate just $36 million in revenue, down from $45 million last fiscal year.
But Navitas is confident that with its partnerships with hyperscalers like Nvidia, its strong brand and technology, and the expected boom in AI factories, it can accelerate revenue generation over time. Analysts project about $130 million in revenue and $18 million in earnings by 2028.
It is a bold pivot by Navitas, but analysts are pretty mixed on it. While the AI data center market has massive and growing demand, there are many larger competitors that it must contend with. It is indeed a gamble that is not expected to pay off until 2027 or 2028, if revenue projections are correct.
The case for Arm
Arm is better positioned for both the short term and the long term. The UK-based company designs CPU chips and licenses the technology to other companies so they can build their chips with Arm's designs.
NASDAQ: ARM
Key Data Points
It is a dominant player in designing CPUs for mobile phones, with its CPU technology in about 99% of smartphones. But in recent years, it has begun to more aggressively expand its CPU designs to handle AI workloads as part of its AI Everywhere strategy.
At the end of 2025, more than half of Arm's revenue was coming from nonmobile licenses, driven by AI data centers.
On the fiscal year Q3 2026 (ended Dec. 31, 2025) earnings call, CEO Rene Anthony Andrada Haas said data center royalties grew 100% year over year. In addition, its market share among hyperscalers for AI data center CPUs is about 50%. That's up from around 18% in 2024.
"We expect in a few years our data center business to be our largest business, larger than mobile," the CEO said.
In fiscal Q4 2026 (ending March 31, 2026), Arm projects an 18% revenue increase over Q3. Looking out, some analysts project 50% compound annual growth for this segment through 2030.
Navitas may get there someday in its pivot, but Arm is already there in its markets. It remains the dominant force in smartphone and consumer electronics CPU designs and is seeing incredible growth in data centers that is only accelerating.
Wall Street analysts rate Arm as a consensus buy with a $147.50 median price target, which would represent 17% growth.
The big concern for Arm is its valuation, which is sky high and is why the stock price has come down about 21%. Looking out, it could settle even lower, as investors take profits and sell high. While Arm is the better long-term play, look for an opportunity to get in at a lower valuation.
