MediaTek stock heads for best week on Google’s AI push

Taiwanese chipmaker MediaTek’s stock is set to post the best week in more than a decade following the AI progress made by its client Google. The stock surged for the fifth consecutive day on Friday, driven by investor enthusiasm over Google’s AI chip deals and new Gemini model, which brought its weekly climb to over 20%.

MediaTek is collaborating with a division of Alphabet Inc. for the design of tensor processing units (TPUs), which are reportedly being viewed as a possible rival to Nvidia’s chips in AI applications. However, the company has allegedly been facing a bleak outlook for its end products. It has also faced increased margin pressure due to high development costs and competition.

Meanwhile, Morgan Stanley analysts Daniel Yen and Charlie Chan noted that MediaTek’s business in China has remained challenging throughout the year and is likely to continue into next year. However, the upside of Google’s TPUs should offset the headwind in MediaTek’s smartphone department. 

The analysts upgraded the company’s stock from equal-weight to overweight on November 27 as AI news brought relief for its shares. However, the stock is still down roughly 2% YTD.

UBS analysts raise MediaTek’s 2027 TPU sales estimate to $4B 

Sunny Lin led UBS Group AG analysts in raising their projections for the contribution of TPUs in MediaTek’s 2027 sales from $1.8 billion to $4 billion. The analysts also estimate that the chips will account for nearly 20% of MediaTek’s operating profit by 2028, depending on execution by both Google and MediaTek. 

Meanwhile, the analysts observed that training LLMs using mostly Nvidia’s GPUs is soon coming to an end, as a shift in focus to inference is putting a spotlight on TPUs. They noted that part of the excitement during this week was due to news that Meta plans to use Google’s TPUs for its data centers in 2027. MediaTek is expected to see further potential upside from the additional Meta ASIC projects, according to UBS.

Macquarie Group Ltd. analysts led by Arthur Lai also said that, in terms of investing in AI stocks in the future, they lean more towards MediaTek over other Google partners and Nvidia’s supply chain. The sell-side is bullish on MediaTek, with 23 buy recommendations, 10 holds, and no sell recommendations. The company’s stock is also expected to rise 9% over the next year.

MediaTek’s cloud AI chips to generate $1B in 2026 revenue 

Rick Tsai, MediaTek’s Vice Chairman and CEO, stated that his company is poised to generate $1 billion in 2026 revenue from its cloud AI chips. He disclosed that the company’s first project is expected to generate multiple billions in 2027, while another project will start generating revenue from 2028 and beyond. 

Tsai also estimated that the TAM (total addressable market) for data center ASIC chips is currently at $50 billion, and MediaTek aims to capture at least a 10%-15% market share over the next two years. He noted that even Nvidia’s $5 billion investment in Intel could not impact his company’s prospects. 

Tsai also believes the news will not affect his company’s joint effort with Nvidia on the GB10 Grace Blackwell Superchip. The GB10 chip is used in Nvidia’s personal AI supercomputer DGX Spark, which went on sale last month.

Meanwhile, in October, MediaTek reported Q3 revenue of $4.64 million (T$142.1 million), up 7.8% YoY but down 5.5% QoQ. The net income also decreased by 0.5% YoY to T$25.5 million, while the consolidated net income was down 9.3% QoQ. The consolidated operating income was down 24.5% QoQ and 7% YoY at T$22.18 million. 

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