Is This Critical Nvidia AI Partner Set to Skyrocket in the Second Half of 2025?

Key Points

• Navitas Semiconductor's products will be used in Nvidia's new 800-volt architecture.

• Navitas has struggled with declining sales growth recently.

• The stock popped after the Nvidia announcement.

• 10 stocks we like better than Navitas Semiconductor ›

Nvidia (NASDAQ: NVDA) has established itself as one of the top artificial intelligence (AI) stock picks in the market, but several other companies are piggybacking on Nvidia's success. One of those is Navitas Semiconductor (NASDAQ: NVTS). Navitas was relatively quiet until May 20, when Nvidia mentioned the company in a release about Nvidia's next-generation architecture.

This caused the stock to soar higher, but it has since leveled off after an initial boost. Many investors consider this lull an excellent buying opportunity, but is it?

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Navitas Semiconductor will benefit significantly from this Nvidia partnership

Navitas Semiconductor specializes in Gallium Nitride (GaN) and Silicon Carbide (SiC) electronic components, which are gaining popularity over prior-generation semiconductors. These are specifically being deployed in Nvidia's new 800-volt architecture, which is a significant departure from today's current 54-volt design. The higher voltage allows for less step-down from the power grid, boosting efficiency, which reduces the amount of energy data centers need to operate.

With the increasing focus on power consumption in data centers, this upgrade is an excellent improvement, but it requires different components, such as those made by Navitas. This could provide a much-needed sales boost for Navitas, as it has been struggling recently.

In the first quarter, revenue was only $14 million, down from $23.3 million in Q1 2024. That's a hefty decline, and new business from Nvidia may be the lifeline that Navitas needs. Still, second-quarter revenue is expected to be only slightly up from Q1, with management guiding between $14 million and $15 million.

NVTS Revenue (Quarterly) data by YCharts.

Time will tell how much revenue this Nvidia partnership adds to Navitas, but it needs it to establish profitability.

Navitas is struggling as a company

Navitas has struggled to produce any semblance of profits over its life as a public company. In fact, it has never come close to breaking even.

NVTS Operating Margin (Quarterly) data by YCharts.

Navitas is spending nearly triple what it brings in, so the boost that Nvidia gives Navitas will need to be significant to make the company a viable investment.

Following the boost that the stock got from the Nvidia announcement, it's also quite expensive from a price-to-sales (P/S) standpoint.

NVTS PS Ratio data by YCharts.

Although Navitas Semiconductor received a significant boost from this announcement, the reality is that its products are just one of many suppliers in the 800-volt architecture project. Navitas' revenue isn't going to increase 10x overnight based solely on this partnership. Investors expecting the stock to skyrocket need to understand that this business is still struggling to break even, and that a significant amount of growth is already baked into the stock price.

Navitas Semiconductor's stock may skyrocket for the rest of the year, but it's impossible to predict until Navitas starts reporting quarters with rising sales. Management has been aware of the Nvidia partnership for longer than the market, and it is projecting only modest revenue growth in Q2.

As a result, I think investors may be better off investing in Nvidia, rather than trying to pick up shares of a struggling business that happened to partner with Nvidia on a project.

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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.