UBS starts coverage on Semtech with buy rating on AI networking push

Investing.com

17 Jan

Investing.com -- UBS initiated coverage of Semtech Corporation (NASDAQ:SMTC) with a "Buy" rating and a price target of $85, given the company’s pivot to artificial intelligence networking as a growth driver.

The brokerage noted Semtech's CopperEdge product, which reduces noise at lower cost and power compared to digital chips, has secured a key win in Nvidia’s Blackwell platform. The CopperEdge total addressable market is estimated at $100 million, with additional opportunities from AMD (NASDAQ:AMD) and hyperscalers.

UBS also pointed to Semtech's FiberEdge product, which targets fiber connections for AI cluster networking and is expected to follow CopperEdge’s adoption path, with Nvidia (NASDAQ:NVDA) leading and hyperscalers likely to follow.

Semtech’s traditional analog businesses, including smartphone components and industrial applications, are expected to see steady growth in fiscal 2025 and 2026.

We believe the company's portfolio review may result in more focus on AI rather than more traditionally industrial businesses, with multiple upside the likely result, UBS said, noting AI data center peers trade at significantly higher earnings multiples than traditional analog companies.

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