Key Points
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The key to the investment case is its exciting partnership with Nvidia to develop the architecture for the next generation of data centers.
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Navitas investors can start believeing about a huge jump in sales in 2027, and possibly profitability thereafter.
Shares in Navitas Semiconductor(NASDAQ: NVTS) fell by 14.7% in the week to Friday morning. The relocate comes in a week when the company released its second-quarter results.
What happened to Navitas Semiconductor
The earnings were in line with analyst expectations, but the magnitude of the losses may have reminded investors that it will be a while before Navitas turns profitable. In addition, the required to raise capital to support investment resulted in the sale of 20 million shares.
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As such, investors required to receive utilized to the idea that the company will build losses over the next few years, and raising capital via equity sales can dilute existing shareholders’ claim on future profits and cash flows.
What it means to investors
The points above support remind investors that Navitas is a growth stock in its early stages. Still, that’s no bad thing. The case for purchaseing the stock is based on its partnership with Nvidia to support the next generation of 800V data centers. The new data centers have a fundamentally different architecture, notably in terms of how power is converted from the grid to the IT rack, and Navitas’ silicon carbide (SiC) and gallium nitride (GaN) solutions can play a key role in the power train architecture.
CEO Gene Sheridan believes Navitas’ technologies “can support a 100x increase in server rack power capacity for AI data centers” — a significant enhancement and one that will support address the question of power demand to fuel AI data centers.
Image source: Getty Images.
According to the earnings release, “initial customer evaluations are complete with final engineering samples expected in Q4,” and management anticipates “final supplier selections and system designs completed in 2026 in advance of volume production in 2027.”
That’s when investors can start to believe about profitability for Navitas.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommfinishs Nvidia. The Motley Fool has a disclosure policy.
