On Monday, Wolfe Research maintained a Peerperform rating on Monolithic Power Systems (NASDAQ:MPWR), addressing concerns stemming from a competitor's report. The report had suggested that Monolithic Power Systems might experience substantial share loss in NVIDIA (NASDAQ:NVDA)'s Blackwell platform due to alleged technical issues.
Contrary to this, the company clarified that they have always communicated about the potential of second and third sourcing for digital power at NVIDIA and are not aware of any technical problems that would preclude their participation in the Blackwell platform. Furthermore, Monolithic Power Systems confirmed that no orders have been canceled to date.
The company's response came after a competitor's note implied that Monolithic Power Systems would have limited or no allocation for NVIDIA's B200 and GB200 products, with only potential shipments for the B300A. This note also mentioned possible backlog cancellations, a claim that Monolithic Power Systems has not corroborated. Following the release of the competitor's note, Monolithic Power Systems reached out directly to NVIDIA for clarification.
In early October, Wolfe Research conducted checks with Renesas, which suggested that Renesas was poised to begin taking market share from Monolithic Power Systems in digital power starting in the fourth quarter of 2024. Renesas plans to initiate shipments to NVIDIA for Blackwell and Hopper platforms, including the B200A and GB200 products. While Renesas did not specify the extent of the expected market share gain in NVIDIA's power business for the calendar year 2025, they anticipated a "meaningful" share, which Wolfe Research estimated could be around 30%. This estimate was based on the belief that Monolithic Power Systems had supplied nearly all of NVIDIA's AI power needs in the current year.
Despite the potential competition from Renesas, Monolithic Power Systems is expected to see high single-digit percentage year-over-year growth in revenue from NVIDIA in the calendar year 2025. This projection takes into account content growth, unit growth, and an estimated 30% market share loss to Renesas. Additionally, Monolithic Power Systems is likely to benefit from approximately 50% content gains in the CPU server market as new server platforms ramp up, improving their market share from 10% to 20% based on current design wins. Vertical power, which yields 2-3 times the revenue of lateral AI power due to higher content, is also anticipated to be a significant revenue driver for Monolithic Power Systems, with contributions expected from custom ASIC customers and AMD (NASDAQ:AMD), despite lower unit sales compared to NVIDIA.
In other recent news, Monolithic Power Systems has been the subject of various analyst adjustments following its record third-quarter earnings of $620.1 million, marking a 30% year-over-year increase. This growth was driven primarily by gains in the automotive, communication, and storage and compute segments, despite a 1.5% decline in enterprise data revenue. Deutsche Bank (ETR:DBKGn) maintained its Buy rating and $900.00 stock price target for the company, despite rumors of potential market share losses to competitors Renesas and Infineon (OTC:IFNNY).
TD Cowen, Needham, and Rosenblatt Securities also adjusted their positions on Monolithic Power. TD Cowen reduced its price target to $975 while maintaining a 'Buy' rating, and Needham also reduced its price target to $950, keeping a 'Buy' rating. Rosenblatt downgraded the stock from 'Buy' to 'Neutral', maintaining a price target of $880.
InvestingPro Insights
Monolithic Power Systems (MPWR) presents a compelling financial profile that aligns with the article's focus on the company's market position and growth prospects. According to InvestingPro data, MPWR's revenue growth remains strong, with a 30.59% increase in the most recent quarter. This robust growth supports the article's discussion of the company's potential for continued expansion in the AI power market, despite emerging competition.
InvestingPro Tips highlight that MPWR has raised its dividend for 6 consecutive years and maintained dividend payments for 11 consecutive years. This consistent dividend policy suggests financial stability and management's confidence in the company's long-term prospects, which is particularly relevant given the competitive pressures mentioned in the article.
Additionally, the company's strong financial position is underscored by another InvestingPro Tip, which notes that MPWR holds more cash than debt on its balance sheet. This financial flexibility could be crucial as the company navigates potential market share challenges and invests in maintaining its competitive edge in the AI power supply market.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide further insights into MPWR's investment potential.
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