Key Points
Data centers could benefit from more power efficiency, and Navitas could help meet that demand.
Investors are pricing in substantial growth, with the price-to-sales multiple at around 42.
The bigger catalyst for the stock might come from improving margins.
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The share price of Navitas Semiconductor (NASDAQ: NVTS) has surged more than 438% over the past year. Its advanced power chips made from gallium nitride (GaN) and silicon carbide (SiC) can help data centers convert power more efficiently. This will be a crucial need over time as artificial intelligence (AI) workloads increase electricity consumption.
Navitas is already making progress in its pivot toward the data center market, an opportunity it estimates at $3.5 billion. Mobile now represents less than 25% of revenue, and AI-related demand is expected to drive revenue through 2026.
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The catch is that revenue growth alone may not be enough to keep the stock climbing from here. Shares trade at a lofty price-to-sales multiple of 42, which means investors are already paying up for years of strong execution.
That's why the bigger catalyst may be profitability, not just growth. Navitas posted an adjusted loss of about $41 million in 2025, and while management expects gradual margin improvement, it likely won't happen overnight. Analysts still project a small adjusted loss through 2028.
The long-term story looks promising, but the path could be bumpy. Any execution missteps -- or slower-than-expected data center buildouts -- could push the timeline out even further. For now, this still looks more like a transition year than a clear setup for a breakout.
Investors should keep a close eye on quarterly results to track how quickly the AI data center shift is translating into bigger revenue and improving margins. If the company starts beating expectations by a wide margin on both sales and earnings, the setup could turn much more favorable.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
