Why Semtech Stock Is Rallying After Its NVIDIA Setback

Core Insights - Semtech's stock experienced significant volatility in 2025, peaking at over $77 before a sharp decline of 31% due to reduced expectations for its NVIDIA-related business [1][2] - Following the decline, Semtech's shares rebounded by approximately 81%, reaching $68, with analysts predicting potential price increases not seen since 2021 [2] - The company's data center revenues more than doubled from Q1 2024 to Q3 2024, contributing to improved margins [2][4] Financial Performance - Semtech reported record revenues of nearly $258 million last quarter, with a gross margin of 53% [7] - The adjusted gross margin increased by over 250 basis points to 52.4%, while the adjusted operating margin rose by over 600 basis points to 18.3% [2] - The data center business grew by 92% last quarter, indicating strong potential for future revenue and margin expansion [9] Product Developments - The company is focusing on its CopperEdge chips for active copper cables, which are expected to enhance the efficiency of data center connections [3] - A partnership with NVIDIA for deploying CopperEdge chips was initially seen as a positive development, but guidance for fiscal 2026 was later reduced, leading to a sell-off [4] Analyst Outlook - Analysts have set a 12-month price target for Semtech at $65.36, with some predicting upside potential of 17% to 19% based on recent targets from Stifel Nicolaus and Oppenheimer [10][11] - The potential for securing additional CopperEdge deals with hyperscale firms is viewed as a key catalyst for future stock price increases [11]