Key insights
- Navitas Semiconductor's stock surged 61% in May, driven by its critical role in AI data center infrastructure as an Nvidia partner. Despite being a loss-making company with a long path to profitability, positive catalysts and strong AI momentum have boosted investor confidence. This highlights the significant market enthusiasm and potential for sustained growth in AI-related sectors, even amidst concerns of a potential bubble.
Navitas Semiconductor (NVTS +24.71%) shares rose by a remarkable 61.2% in May, according to data from S&P Global Market Intelligence. The move comes due to a confluence of positive events for the company of the month that helped confirm Navitas as one of the most highly sensitive stocks to the AI infrastructure boom.
It's a company that Wall Street analysts don't expect to generate earnings until 2030. The bears argue that the AI spending "bubble" will burst by then, while the bulls argue that AI infrastructure is only in its early innings and point to continually rising expectations as a sign of growing momentum. The bulls won the argument in May.
Navitas' exposure to the high-power end markets, most notably AI data centers (it's an Nvidia partner in developing power chips for the next generation of high-voltage data centers), and including energy/grid infrastructure and industrial electrification, puts it at the forefront of the debate. That's why some bears tend to take short positions in the stock, hoping to inordinately benefit from an AI stock correction.
However, when the stock has positive catalysts, short sellers are often forced to close their positions aggressively. And Navitas had plenty of catalysts in May.
History suggests that an AI bubble will form, and loss-making stocks like Navitas will be badly exposed in the fallout. However, history also suggests that many bears are too early to the bubble-bursting afterparty. History also suggests that even if a bubble bursts, it can leave the industry trending at a baseline growth rate far higher than it was in the early innings of a long-term spending boom.
For now, the bulls are winning the argument, and as long as AI-focused companies are raising growth expectations, that's likely to continue.