Navitas Stock: Will the AI Shift Be Enough to Propel the Stock after the Hefty Drop-Off?

TradingKey - Navitas Semiconductor(NVTS) has risen to become one of 2023's hottest small cap semiconductor companies, reaching a more than double increase by the end of 2025, then returning a large portion of those gains, resulting in uncertainty among investors as if the company is a turnaround play or if the stock had truly run up ahead of the business's fundamentals. Underneath all the noise, the company is currently undergoing a slow yet risky shift away from its historic China-based consumer business to datacenters and artificial intelligence (AI) infrastructures.

For Navitas investors, the question isn't whether or not Navitas possesses exciting technology; rather, the question is whether the company's present fundamentals and valuation are adequate reasons to purchase stock in Navitas.

Background: Company undergoing a strategic realignment

Navitas is a semiconductor manufacturer that makes power semiconductors for battery charging and power conversion. Navitas powers many electronic devices, including electric vehicles, laptops, data centers, and smartphones. For instance, Navitas is a world leader in GaN (gallium nitride) power integrated circuits (ICs), which allow electric vehicles to charge their batteries two to nine times faster than the traditional silicon-based circuits.

Historically, for many years, approximately 60% of Navitas’ total revenues were derived from the sales of power semiconductors used in mobile and consumer electronics in China. Although Navitas generated many revenues from that segment, the company has proactively moved away from this overreliance and has begun to reposition its business to become aggressive in the end markets that hold a far greater potential for long-term growth: namely, AI/data centers, electric vehicles, and energy infrastructure.

The company’s stock has skyrocketed over the last year as the result of this strategic repositioning and now faces a significant downturn due to near-term operational performance.

Navitas’s Shift from Consumer China to AI Data Centers

The demand for AI has influenced how semiconductor firms allocate their capital, and as a result, Navitas is looking to deploy its GaN and Silicon Carbide power technologies in their next generation of Data Center Power Architecture.

Jeff Bezos and other Company Leaders have indicated that they will welcome a shrinking of their legacy businesses so that their energy will be redirected toward AI opportunities–for example, by liquidating excess inventory from low-margin and slow-growth businesses.

The numbers indicate how costly this decision was for Navitas. For the first three quarters of 2025, Navitas generated total revenues of $38.6 million, a 41% decrease from revenues of $65.3 million from the previous year. During the same period, the Company incurred an operating loss of $66.4 million, with operating expenses of $77.8 million. The Company’s Management has recently indicated that they expect these headwinds to continue in the future and are predicting only $7 million of revenue for the fourth calendar quarter compared to $18 million for the previous calendar quarter.

Adding to the uncertainty of this transition is the departure of the founder and CEO Gene Sheridan in August of this year and the appointment of Chris Allexandre as the new Company Leader to guide Navitas through the next chapter of its development.

Why Navitas Stock Rose

Navitas stock was able to have a large move up even though Navitas had terrible revenue numbers and negative net numbers and their estimates for 2025 seem incongruous at best. Two factors played into this rally.

The first factor is what I call "thematic positioning." Investors were searching for smaller businesses with a connection to the AI buildout. Navitas has now aligned itself with that investor interest by focusing on data center based power systems, making it a candidate to be among the bigger benefactors of this theme.

The second catalyst was the announcement of a partnership with Nvidia. The price of Navitas stock soared in October after Nvidia had completed its development on high-performance power devices to support the unique and stringent power demands for Nvidia's customers. While this partnership has not yet led to significant production revenue, it was the validation (from a third party) that Navitas' technology would meet the most extreme power requirements associated with AI.

Another important part of this story was the strength of Navitas' balance sheet. At the end of the third quarter, the company had $150.6 million in cash and cash equivalent and zero debt. Then in November, a further boost was provided by the company being able to raise roughly $100 million in private equity. With this amount of cash, Navitas now has additional time to continue its transition without an immediate, heavy cash burden.Management sees revenue bottoming in Q4 and growing again in 2026 and cut operating expenses next year.

Valuation and credibility: The market is already pricing in success

The market prices in success. The business continues to lose money, the revenue continues to decline, and the proof of concept for the pivot has yet to be seen. Insiders, such as Singh and Gary Kent Wunderlich, have sold shares (128,300 and 179,354 respectively) in Boston during the month of December, which is not uncommon after a substantial rally. The optimism built into the market's valuation, which is still priced at a significant premium relative to its valuation earlier this decade on a price-to-sales basis, may be the reason for the insider selling and why people may question the current price of the stock.

As outlined above, the foundation upon which this valuation is premised is a brittle foundation because it is the company's potential future earnings in the event of success of its current strategy that the market is valuing, rather than the current revenue earning potential of the company.

Dangers and potential snares

Several things are still hanging in the air for investors:

• Execution risk: The whole investment thesis hinges on Navitas turning AI-related design wins and partnerships into meaningful, repeatable revenue.
• Basic disconnect: Revenue is still declining rapidly, yet the stock is priced like a growth story.
• Leadership change: The strategic transformation is complex and a new CEO is coming on board in the midst of it.
• Timing risk: Management is looking for a turnaround beginning in 2026, but the market may not wait if the 2025 and early 2026 data are not sufficient.

This is how investors must think about navitas stock

Investors need to keep in mind that  NAVITAS stock is more than just another cyclical downturn; rather, NAVITAS’ unique situation represents a major turnaround in how they will approach their business going into the future. While this may represent a very risky strategic departure, it provides NAVITAS with an opportunity for a very substantial return.

NAVITAS has made some very large bets to try to reinvent their gallium nitride (GaN) power semiconductor business. In doing this, they will try to position themselves for a very lucrative market opportunity related to computer data centres and high performance computers. If they can achieve the success that the stock market currently prices into the NAVITAS stock price, then the revenue streams the company generates from itself will look trivial in hindsight.

However, the risk of investing in NAVITAS at this time still requires faith. The business model of NAVITAS must first contract before it begins to grow. NAVITAS is going to lose a tremendous amount of money in the near term and the stock price for NAVITAS already reflects the anticipation of a very positive outcome for the new strategy.

At this point in time, it is probably the best strategy for most investors to watch NAVITAS closely over the next several months as they evaluate how NAVITAS will execute on their AI-related strategy. If NAVITAS executes well, the risk reward will be very substantial for early investors; however, for now, the story of NAVITAS is interesting, but it still has not presented enough opportunity to take the first step into NAVITAS stocks and invest capital.