Why Navitas Semiconductor Stock Surged Today

Key Points

• Navitas Semiconductor stock jumped thanks to bullish news for Nvidia today.

• Nvidia announced that it would receive approval to sell its H20 processors in China, and the news helped power valuation gains in the semiconductor industry.

• Navitas is still a relatively small partner for Nvidia, and its performance outlook is highly speculative.

• 10 stocks we like better than Navitas Semiconductor ›

Navitas Semiconductor (NASDAQ: NVTS) stock posted a day of big gains in Tuesday's trading. The company's share price climbed 6.1% in the daily session amid the backdrop of a 0.4% decline for the S&P 500 and a 0.1% gain for the Nasdaq Composite. The stock had been up as much as 10.7% in the session before ceding some ground.

News that Nvidia will receive licensing approval to sell its H20 artificial intelligence (AI) processor in China helped spur bullish momentum for Navitas and other chip stocks today. Navitas stock is up roughly 259% over the last three months, with most of the stock's gains stemming from an announcement that the company had partnered with Nvidia.

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Image source: Getty Images.

Navitas surges as Nvidia gets good news

Nvidia said today that it had received confirmation from the Trump administration that licensing approval would be granted for the company to sell its H20 processor in China. The news helped push the AI hardware leader's valuation to a new record high, and the gains extended to other players in the semiconductor space. As a partner of Nvidia, Navitas saw a significant valuation jump from from the news.

What's next for Navitas Semiconductor?

With its last quarterly report, Navitas guided for sales to be between $14 million and $15 million in its June-ended quarter. Meanwhile, the company's midpoint guidance calls for a non-GAAP adjusted gross margin of roughly 38.5% in the period. The company will likely publish its results for the period next month. Navitas now has a market capitalization of roughly $1.2 billion and is valued at approximately 19 times this year's expected sales.

Navitas is currently getting a large valuation premium thanks to its association with Nvidia. While Navitas stock looks risky, it's possible that the partnership with Nvidia will open big doors for its gallium nitride (GaN) and silicon carbide (SiC) power semiconductors in the data center market.

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