Navitas' AI Data Center Pivot Hinges on Sampling Success Amid High Valuation and Execution Risks

What happened

Navitas Semiconductor is transitioning from low-margin mobile SiC to high-power SiC/GaN solutions for AI data centers, with management guiding for sequential revenue and gross margin improvements from FQ1 2026, driven by product samplings across OEMs, ODMs, and hyperscalers. This growth roadmap is critical as the company faces a sharp revenue decline from China mobile weakness, with Q3 2025 revenue down 53% year-over-year and R&D intensity exceeding 100% of revenue. Despite a cash position of $236 million, Navitas remains unprofitable and highly dilutive, having raised over $200 million in equity in 2025, while trading at a premium EV/Sales multiple of 53.33x versus peers. The DeepValue report identifies two auditable gates for success: Powerchip/PSMC GaN qualification and mass production by 1H 2026, and sequential revenue recovery from the guided Q4 2025 trough of ~$7 million. However, the reliance on non-binding collaborations and long qualification cycles in data center markets means near-term execution risks are elevated, with failure likely triggering further dilution.

Implication

The dependency on product sampling for AI data center wins introduces significant uncertainty, as design-in announcements lack binding purchase orders and may not translate to timely revenue. Navitas' premium valuation of 53.33x EV/Sales embeds aggressive assumptions about high-power market adoption, which must materialize quickly to justify the price amid persistent unprofitability and cash burn. Continued dilution risk is high, with operations consuming $34.8 million in cash over nine months ending September 2025, making additional equity raises probable if sampling delays or revenue stagnation occur. Critical milestones, including Powerchip/PSMC mass production by 1H 2026 and sequential revenue growth from Q4 2025, must be met within 6-12 months to avoid thesis breakdowns and capital impairment. Therefore, investors should align with the DeepValue 'WAIT' rating, seeking concrete evidence of execution before considering entry, while being prepared for volatility from newsflow around sampling outcomes.

Thesis delta

The new article does not shift the core investment thesis but reinforces the DeepValue report's emphasis on execution risks by explicitly tying Navitas' growth roadmap to successful product sampling. It highlights that the premium valuation and near-term financial improvements are contingent on sampling converting to production wins, underscoring the need for vigilance on these checkpoints. Investors should view this as a confirmation that without auditable progress on sampling and the foundry transition by mid-2026, the thesis weakens significantly.