Anticipation: The Value of This Artificial Intelligence (AI) Microchip Company's Shares is Likely to Increase Beyond February 26th (Caveat: It's Not Nvidia)

Anticipation: The Value of This Artificial Intelligence (AI) Microchip Company's Shares is Likely to Increase Beyond February 26th (Caveat: It's Not Nvidia)

Ambarella, with a ticker symbol AMBA, might not be as famously recognized as Nvidia in the artificial intelligence (AI) semiconductor realm. However, over the past six months, Ambarella has managed to outshine its more renowned competitor. While Nvidia's stock has appreciated by 13%, Ambarella's shares have skyrocketed by an astounding 64%.

Nvidia's impressive stock market surge has recently slowed down, attributable to external factors beyond its control. Nonetheless, anticipation is high for Nvidia to reclaim its former glory when it releases its quarterly results on February 26.

Similarly, Ambarella is scheduled to announce its fiscal 2025 fourth-quarter results on the same day. There's a strong possibility that Ambarella's performance will surpass analyst expectations, propelling its stock price upward.

The Power of AI

Ambarella specializes in creating computer vision processors for edge devices. These devices, which include autonomous vehicles, security cameras, drones, IoT devices, and wearables, analyze data on-site instead of sending it to a server for processing. This real-time capability is particularly appealing as the demand for AI-enabled edge devices is set to surge.

Rosenblatt Securities has estimated that the edge AI hardware market's revenue could more than double in the next five years. Ambarella offers investors an opportunity to capitalize on this trend, with the potential to benefit from the advancements made by Chinese AI start-up DeepSeek.

DeepSeak's inexpensive AI model could spur the application of AI in edge devices, leading to increased demand for processors capable of handling AI tasks effectively. And guess what? Ambarella is already reaping the benefits of this trend, with its revenue and earnings growing thanks to AI.

During the third quarter of fiscal 2025, Ambarella reported record-breaking AI revenue, which greatly contributed to a higher blended average selling price. The company's revenue grew an impressive 63% year over year in this quarter, and Ambarella even reported a non-GAAP profit, bucking the trend of posting losses in the previous year.

Ambarella has projected revenue of $78 million for its fiscal Q4, representing a 51% increase from the same period in the previous year. While Wall Street expects a loss of $0.02 per share, there's a strong possibility that Ambarella will exceed expectations, thanks to "better than expected adoption of our AI SoCs in Other IoT markets."

What's more, Ambarella has started testing a new edge AI processor with automotive clients, pointing toward continued growth and success in the near future.

Positioned for Prosperity

Seventy percent of Ambarella's revenue in Q3 came from edge AI applications. The automotive industry accounts for two-thirds of the total revenue, with the remaining coming from AI-powered IoT applications. The company anticipates its serviceable market to grow from approximately $5 billion in fiscal 2024 to nearly $9 billion in 2027.

With robust growth projected for the coming years, Ambarella is in a solid position to continue its remarkable trajectory. Analysts expect Ambarella to become profitable on a non-GAAP basis in the next fiscal year, possibly leading to further upside in the stock market. With a target price of $95, based on the consensus of 15 analysts, Ambarella shares are poised for a potential 22% increase from their current levels. If you're looking to invest in an AI stock, Ambarella might just be the ticket to even higher returns following its upcoming quarterly results on February 26.

After outperforming Nvidia in terms of stock price growth, Ambarella's potential to surpass analyst expectations in its 2025 fourth-quarter results could attract more investors, leading to an increase in its stock price. Ambarella's strong financial performance in AI-related sectors, such as its record-breaking AI revenue and non-GAAP profit, demonstrates the company's potential for growth in the semiconductor market. With a significant portion of its revenue coming from AI applications and the automotive industry, Ambarella is well-positioned to capitalize on the projected growth of the edge AI hardware market, potentially leading to further increases in its stock price.

The surge in demand for AI-enabled edge devices, estimated to more than double the market's revenue in the next five years, presents an opportunity for investors to benefit from Ambarella's position in this market. Ambarella's partnership with Chinese AI start-up DeepSeek, whose inexpensive AI model could increase the application of AI in edge devices, also positions Ambarella to capitalize on this trend. With analysts expecting Ambarella to become profitable on a non-GAAP basis in the next fiscal year and a target price of $95 based on the consensus of 15 analysts, investing in Ambarella could potentially yield significant returns following its upcoming quarterly results on February 26. By focusing on finance and investing in Ambarella, an individual can potentially benefit from its growth in the AI semiconductor market.

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