Navitas Semiconductor (NVTS +18.25%) has moved away from its previous core market of power chips for mobile and consumer products toward potentially more lucrative high-power markets. The latter includes AI data centers, high-performance computing, grid and energy, and electrification. It's an Nvidia (NVDA 0.90%) partner too, and set to play a major role in the next generation of data centers set to hit the market next year. That fact has a major role to play in the stock's 16.7% rise by 12 p.m. today.
Nvidia and Navitas Semiconductor
Traders like to take speculative positions in stocks around events that drive high volatility, and one such event is Nvidia's earnings this week. What Nvidia's management says about the AI data center end markets is obviously critical to Navitas, because the latter is developing power chips that are integral to the new 800V high-voltage direct current (HVDC) data centers Nvidia is building.
NASDAQ: NVTS
Key Data Points
As previously outlined, Navitas' stock soared last month as the company announced the development of its latest power delivery board, and short sellers were forced to close positions amid continued positive updates on the AI data center market.
What happened this week with Nvidia
The same trading conditions were replicated in a microcosm ahead of Nvidia's earnings this week. The short interest ratio (the number of days it takes to unwind short positions based on average daily trading volume) jumped from about 0.8 to more than 1.5 in the days leading up to the report, according to data from S&P Global Market Intelligence.
Image source: Getty Images.
The idea is to profit inordinately from a decline in Navitas's share price if Nvidia disappointed the market. However, with Nvidia confirming the market's underlying strength, the shorts were forced to unwind their positions again.
Long-term investors won't worry too much about these sorts of fluctuations, but the reality is they are likely to occur again. Such is the nature of markets.
