Why Navitas Semiconductor Stock Skyrocketed This Week

Navitas Semiconductor (NASDAQ: NVTS) stock posted huge gains across the last week of trading. The company's share price surged 78.1% compared to its valuation level at the end of the previous week's market close.

Navitas published a press release on Oct. 13 announcing that it was providing new chips for Nvidia's next-generation artificial intelligence (AI) factory computing platform. With the benefit of the recent rally, the stock is now up roughly 311% year to date.

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Navitas scores a big rally following new Nvidia partnership

Navitas stock soared recently after the company announced that it's providing gallium nitride (GaN) and silicon carbide (SiC) power semiconductors that will be used in Nvidia's next-gen data centers. Nvidia continues to be the clear-cut leader in advanced graphics processing units (GPUs) used to power AI data centers, and scoring a new partnership in artificial intelligence looks to be a big win for Navitas.

What's next for Navitas?

Following recent gains, Navitas now has a market capitalization of roughly $3.1 billion. At that valuation level, the company is trading at approximately 64 times this year's expected sales.

With its last business update, Navitas guided for sales of $10 million in the third quarter. This target actually suggests a significant sequential quarterly sales decline compared to the business's revenue of $14.5 million in the second quarter.

Despite the sales drop off, investors are betting that Navitas' growth is poised to reaccelerate in the not-too-distant future. It's not unusual for a relatively small chip company to see uneven sales performance in early growth phases, and shareholders are betting that Navitas' partnerships and design wins will drive more strong gains.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.