TL;DR:
- MediaTek’s stock has surged by nearly 40% since June, outperforming rivals like Qualcomm.
- The rise is fueled by high demand for mobile devices featuring MediaTek’s chips, particularly in China.
- MediaTek’s Dimensity 9300 chip is seen as a game-changer, challenging Qualcomm’s dominance in the high-end mobile market.
- Analysts have increased earnings per share estimates by 13% and raised price targets by 27%.
- The Dimensity 9300 chip is gaining traction and is expected to capture a larger market share in flagship smartphones.
- MediaTek’s sales are projected to grow by 14% this quarter, snapping a year-long decline.
- The company’s inventory has improved, and mobile phone sales rose by 19% in Q3.
- The stock’s rally reflects the broader recovery in China’s smartphone industry, with double-digit growth in October.
Main AI News:
Taiwan’s technological powerhouse, MediaTek, has witnessed a remarkable surge in its stock value, soaring by nearly 40% since the close of June. This exceptional performance outshines a mere 2% uptick in the Philadelphia Stock Exchange Semiconductor Index and a modest 7% increase in its US-based rival, Qualcomm Inc. At the core of this phenomenal rise lies a fervent demand for mobile devices powered by MediaTek’s cutting-edge chips, particularly in the thriving Chinese market.
The fervor surrounding MediaTek has brought to light the intensifying competition among semiconductor giants, all vying to harness the potential of artificial intelligence (AI) and carve out a larger slice of the lucrative smartphone industry. Market analysts view MediaTek’s Dimensity 9300 chip as a game-changing innovation, poised to disrupt Qualcomm’s stronghold on the high-end mobile sector.
Investor enthusiasm for MediaTek shows no signs of waning. Since the close of July, analysts have revised their earnings per share estimates for the company upwards by a substantial 13%. Simultaneously, short interest in the stock has dwindled from its June peak, and price targets have surged by an impressive 27% since a July low.
Robert Mumford, an investment manager at GAM Hong Kong Ltd., emphasizes, “MediaTek’s valuation relative to its growth prospects into the next year still appears attractive. The recovery in the handset market, the launch of MediaTek’s state-of-the-art system-on-chip at the opportune moment, and the potential AI product rollout are all propelling factors.”
Much of this optimism revolves around the Dimensity 9300 chip, a direct contender against Qualcomm’s Snapdragon 8 Gen 3. Both companies are racing to incorporate AI technology into their devices, contributing to the emergence of the “edge AI” phenomenon, a pivotal investment theme expected to define 2024, according to numerous Wall Street banks.
Morgan Stanley analysts, including Charlie Chan and Daisy Dai, assert, “Dimensity 9300 stands as the most powerful mobile system-on-chip and has already started gaining traction with Vivo’s latest smartphone.” The bank anticipates that MediaTek’s market share in the flagship smartphone segment will surge from 20% in 2023 to an impressive 30%-35% by 2024, translating into a growth from 13 million units to approximately 20 million.
The Dimensity 9300 chip has been meticulously designed to tackle the intricate workloads of cutting-edge generative AI and gaming applications, marking a significant improvement over earlier designs that failed to capture investors’ imaginations. The recently launched Chinese smartphone, Vivo X100, is the first model to feature this groundbreaking chip, with the OPPO Find X7 series set to follow suit.
Currently trading at approximately 17 times forward estimated earnings, MediaTek’s valuation remains in line with its five-year average. With a market capitalization exceeding $47 billion, MediaTek proudly claims the title of Taiwan’s second-largest publicly listed company, second only to Taiwan Semiconductor Manufacturing Co Ltd.
Amidst the smartphone boom, the company’s sales are expected to surge by 14% in the current quarter compared to the previous year, breaking a streak of four consecutive quarters of year-on-year decline, as reported by Bloomberg’s data. During its earnings call, MediaTek revealed that its inventory has experienced a steady decline over five consecutive quarters, reaching a healthy level of 90 by the close of the third quarter. Mobile phone sales, which contribute approximately half of the company’s revenue, surged by 19% in the three months ending September, driven by restocking demand and the introduction of new 4G and 5G models.
The rally in MediaTek’s shares not only mirrors the company’s resurgence but also reflects the broader recovery in China’s smartphone industry. In October, the world’s largest mobile market witnessed a remarkable 11% surge in phone sales during the first four weeks, compared to the same period a year earlier, according to Counterpoint Research data.
Conclusion:
MediaTek’s remarkable stock surge, driven by its cutting-edge Dimensity 9300 chip and strong sales performance, signifies the company’s growing prominence in the semiconductor market. As it challenges Qualcomm’s dominance and captures a larger share of the smartphone industry, it demonstrates the increasing importance of AI technology in this sector. This trend indicates a shifting landscape in the semiconductor market, with MediaTek poised to be a major player in the high-end mobile market.
