Monolithic Power Earnings: We See AI Deceleration as Short-Term, and We Maintain Our $700 Valuation

We maintain our $700 fair value estimate for shares of wide-moat Monolithic Power Systems as we maintain our long-term growth thesis for the firm. MPS had a standout third quarter, with strong, broad-based growth across its end markets. At the same time, high-flying data center revenue growth decelerated in the quarter below our expectations. This deceleration doesn't worry us, given MPS' data-center sales remain at a high level, and that we believe there is more growth ahead. We believe this quarter shows MPS' admirable position across diverse end markets, across which we believe it is gaining market share. Shares sold off after hours on weaker AI revenue, but we continue to view the stock as moderately overvalued. We have rosy expectations for both AI and non-AI growth over the next 10 years for MPS, but we believe there remains some overexuberance priced into the stock at current levels.