The partnership with Nvidia is expected to bear fruit in 2027.
Navitas is aggressively pivoting toward higher-margin end markets, such as AI data centers.
There’s no evidence to suggest any slowdown in AI and data center capital spending as yet.
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Shares in Navitas Semiconductor (NASDAQ: NVTS) declined by 35.1% in November, according to data provided by S&P Global Market Intelligence. The move came as the market took a more negative view of AI-related stocks. One of the market’s concerns is that capital spending on AI is forming a bubble that will burst, leaving the valuations of stocks like Navitas exposed. Here’s what you need to know before investing in Navitas.
A loss-making small-cap company that’s actively pivoting away from its previous core end markets. Navitas CEO Chris Allexandre was crystal clear on the company’s last earnings call: “We are deprioritizing lower margin, short life cycle projects, transactional markets and customers such as mobile and selected China-based segment to redeploy capacity and attention to durable high-power program.”
The new focus of the company is on high-power solutions for hyperscalers, top-tier customers, and “leaders in our focus markets, AI data centers, performance computing, energy and grid infrastructure, and industrial electrification.” These end markets include Navitas’ partnership with Nvidia on developing solutions for the next generation of 800V high-voltage direct current (HVDC) data centers, scheduled for 2027.
As such, when the market became a bit cautious about the AI-related sector in November, it was natural that Navitas would be particularly badly affected.
Perhaps the market’s most significant concern regarding the AI market stems from the fear that the massive capital investments made now won’t prove productive enough to sustain the current rate of growth in the future. There’s undoubtedly some truth in that argument, as history demonstrates that many unproductive investments will be made in the rush to adopt new technologies. However, it also teaches that, while growth in new technologies does tend to overshoot, there’s usually an underlying uptrend that the market settles on.
Unfortunately, it’s tough to determine precisely where we stand with regard to that trendline.
However, what we do know is that there are no signs of any slowdown in the market now. We also know that Navitas is one of only two companies (the other is ON Semiconductor) that provide solutions from the wall (silicon carbide semiconductors that convert AC power from the grid to the 800V HVDC) to the core (gallium nitride chips that convert the 800V HVDC down to much lower DC voltages used to power processors). Management is expecting material contributions to profitability from it in 2027.
