"Chip replacement" rebirth! MediaTek bids farewell to mature business slump and tells a new story of market value growth of 130 billion US dollars with AI ASIC.

MediaTek's stock price is currently experiencing its best quarter ever. Investors are betting that the company's transition to the artificial intelligence (AI) chip track will help it completely break free from the valuation suppression caused by the continued downturn in traditional mature businesses. The market is increasingly optimistic about this Taiwan-based chip company, believing that its exclusive integrated circuit (ASIC) design collaboration with Alphabet Inc. Class C (GOOGL.US) signifies the launch of a new growth engine. Since the end of March this year, MediaTek's stock price has increased by 174%, making it one of the most eye-catching stocks in the Asian market, with a market capitalization growth of over $130 billion. This value reassessment reflects the increasing attention ASIC is receiving as AI gradually focuses on everyday applications. ASICs can provide large tech companies with lower costs and more customization space. MediaTek's collaboration with Alphabet Inc. Class C has sparked expectations in the market for it to gain more business and seize market share from the industry leader, Broadcom Inc. (AVGO.US). Kevin Net, director of Asian stocks at Financire de l'Echiquier, said, "MediaTek has made significant progress in the data center ASIC business, and investors' views on it have changed accordingly. Until the beginning of this year, the market mostly still saw it as a smartphone chip company." Smartphone chips still account for about half of MediaTek's revenue, making it vulnerable to the softness of the smartphone market - this has been reflected in the company's latest financial forecasts. However, with MediaTek actively expanding its AI business, investors who are optimistic about its prospects are looking towards the future. ASIC breakthrough: The rise of the latecomers MediaTek's breakthrough is ASIC. These chips are cheaper than the graphics processing units used by NVIDIA Corporation (NVDA.US) for AI training. NVIDIA Corporation CEO Jensen Huang also mentioned ASIC last week and predicted that Marvell Technology, Inc. (MRVL.US) in this field will be valued at $1 trillion under the drive of thriving business. Market expectations for MediaTek's success are heating up. In the past few months, its stock price gains have surpassed Broadcom Inc. as well as Taiwan's AI ASIC competitors such as Alchip Technologies and Global Unichip Corporation (GUC). To strengthen its AI business, MediaTek is actively recruiting. The company expects AI-related revenue to reach about $20 billion this year and further growth by 2027. In May this year, MediaTek expected to capture up to 15% of the market share in a $80 billion ASIC market next year. Kevin Wang, an analyst at Mizuho Securities Asia, believes that this target may still be conservative. He pointed out, "We predict that MediaTek will achieve its high-end market share target by 2027 and may even exceed expectations." He also mentioned that Alphabet Inc. Class C is currently a leading ultra-large company using AI ASIC, "indicating that MediaTek is expected to achieve significant market share growth," and the company is also negotiating with other potential customers. Flexibility may be the key to MediaTek winning business. Morningstar analyst Phelix Lee pointed out that although MediaTek is a latecomer in this field, it "generally shows greater flexibility in meeting customer needs." Overvalued controversy: Expensive or not? Look to the future MediaTek's stock price hit a historical high at the end of May, driving its valuation to a new high as well. Currently, its forward 12-month price-to-earnings ratio is 45 times, compared to 24 times for Broadcom Inc. and 21 times for semiconductor giant Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US). Despite this, since early February, the market's consensus expectations for MediaTek's earnings per share for the next year have been raised by over 30%. Analyst ratings are mostly positive for MediaTek: there are 29 "buy" ratings, 2 "hold" ratings, and no "sell" ratings. Kevin Wang of Mizuho Securities said that the "incremental AI business," including chips for wearable devices such as smart glasses, is expected to drive MediaTek to achieve annual profit growth of over 60% in 2027 and 2028. He believes, "If such upside potential is seen, the current stock price is not considered expensive."