Shares of Navitas Semiconductor Corporation (NASDAQ: NVTS) rocketed as much as 24.6% on Monday before settling into a 20.4% gain as of 2 p.m. EST.
There wasn’t any company-specific news out of Navitas today, but there was news on the geopolitical front relating to semiconductors. Apparently, Navitas investors took the developments positively.
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On Monday, the Biden administration launched an investigation into the practices of Chinese semiconductor companies in critical industries. The chips in question are mostly trailing-edge chips based on silicon carbide (SiC) and gallium nitride (GaN) materials. While these are “less advanced” than, say, AI chips, these types of semiconductors are increasingly going into critical systems in auto, industrial, medical devices, telecommunications, defense, and other critical applications.
These trailing-edge chips based on SiC or GaN materials are exactly the kinds of chips that Navitas produces. So Navitas rallied along with other semiconductor stocks in the trailing-edge space on the news.
However, most chips companies in the space didn’t rally nearly as hard as Navitas. This is likely because Navitas is a smaller company with higher risks than the larger players in the space and is down much more on the year. The stock has been hammered, down over 50% in 2024, as industrial and auto semiconductor markets have been mired in a severe downturn. The short interest in Navitas was also a very high 18.8% at the end of November, perhaps fueling a bit of a short squeeze today.
Despite the gains today, Navitas remains a risky bet. The company has never been profitable, and it will probably remain subject to big swings based on elements like interest rates and geopolitics that are not within its control. In addition, Navitas sells products to Chinese device makers, so it could actually be hurt if China were to retaliate against U.S. chip companies.
While Navitas stock could very well rip higher with a definitive turnaround in the industrial, auto, and mobile chip sectors, there are several less risky ways to play that scenario.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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