Leading tech companies are investing heavily in data centers for artificial intelligence (AI). This is opening up opportunities for Navitas Semiconductor (NVTS +12.02%).
Navitas uses specialized materials, such as gallium nitride (GaN), to make semiconductors that convert and control power in consumer devices like smartphones. But it's now pivoting to the data center market. Data centers will need greater energy efficiency to keep costs down and run next-generation chips.
The stock has nearly tripled in value over the past year, as management expects the business to begin benefiting from this opportunity over the next few years.
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Navitas is transitioning from selling products in low-margin consumer markets to a more profitable opportunity in AI data centers. The company estimates the total serviceable addressable market will grow from 66% to 87% annually through 2030, reaching $1.4 billion to $2.5 billion. That's significant compared to Navitas' trailing-12-month revenue of $56 million.
However, Wall Street analysts are mixed on the stock's upside, with most calling it a hold. This seems to be a valuation-based call, as the stock is already trading at an expensive 28 times sales. This valuation accounts for a significant increase in the company's revenue.
NASDAQ: NVTS
Key Data Points
The stock's upside might be limited until Navitas shows stronger growth from this opportunity. Revenue has been falling as Navitas transitions its business from the consumer market to data centers. It also reported a $19 million loss in the third quarter.
Analysts expect the company's revenue to decline in 2026, suggesting Navitas may not deliver meaningful results from the data center opportunity until 2027. That's a long time to wait for a stock trading at a high sales multiple. Given the high valuation, investors might want to wait until the business returns to revenue growth before buying shares.
