MediaTek Inc (聯發科) shares posted their best week since 2002, as artificial intelligence (AI) advances at its client Google help reshape the growth outlook for the Taiwanese chip designer.
The stock yesterday rose for a fifth-straight day in Taipei, taking its weekly gain to 22 percent, on investor enthusiasm over Google’s latest Gemini model and AI chip deals.
MediaTek has reportedly partnered with the Alphabet Inc unit on design of tensor processing units (TPUs), seen as a potential rival to Nvidia Corp chips in AI applications.
Photo: CNA
The stock price of MediaTek rallied 4.1 percent to NT$1,395 yesterday, ending the week 21.3 percent higher.
Known for its smartphone chips, MediaTek has suffered from a cloudy outlook for end-product demand, as well as margin pressure due to competition and high development costs.
The AI news has brought relief for the shares, which are still down about 2 percent on the year.
China business remains tough into next year, but “Google TPU upside should offset the smartphone headwind in the longer term,” Morgan Stanley analysts Charlie Chan (詹家鴻) and Daniel Yen (顏志天) said.
They upgraded the stock to overweight from equal-weight on Thursday.
The early days of AI centered on the training of large language models (LLM), which requires the massive computing power provided by graphic processing units such as those from Nvidia.
The shift in focus to inference — or how LLMs respond to user queries — is putting a spotlight on application-specific integrated circuits (ASIC), such as TPUs.
UBS Group AG analysts led by Sunny Lin (林莉鈞) raised their estimate for MediaTek’s sales contribution from TPUs in 2027 to US$4 billion from US$1.8 billion.
The analysts see the chips accounting for 20 percent of the company’s operating profit by 2028, “depending on execution by MediaTek and Google,” they wrote in a note on Thursday.
Part of this week’s excitement was due to news that Meta Platforms Inc is in discussions to use Google TPUs in data centers in 2027.
UBS sees further potential upside for MediaTek from additional ASIC projects with Meta.
The sell-side overall is bullish on MediaTek, with 23 buy recommendations, 10 holds and no sells. The consensus price target projects a further 9 percent rise in the stock over the next year.
In terms of future AI stock investing, Macquarie Group Ltd analysts including Arthur Lai said they “lean more” toward MediaTek and other Google partners over the Nvidia supply chain.
“We view the current AI surge as less a speculative bubble, but rather a necessary, capital-intensive build-out of a new, foundational technology layer,” they wrote in a report this week.
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