Monolithic Power Earnings: Choppy End Markets in 2023 Don’t Deter Our Long-Term Confidence

We maintain our $535 fair value estimate for wide-moat Monolithic Power Systems’ shares after its second-quarter results and third-quarter guidance met our expectations. We see MPS’ execution as solid amid customers continuing to work through excess inventories and offering low order visibility. MPS is a meaningful secondary beneficiary of the recent surge in artificial intelligence spending, but its growth in AI sales is partially offset by lower spending allocation to traditional computing. We reiterate our view that MPS is well-positioned for strong, long-term growth with highly differentiated chips that can benefit from secular trends like AI and electrified vehicles. We believe the 7% selloff after reporting reflects the market being overly focused on near-term market dynamics. We see shares as fairly valued.