Monolithic Power Earnings: We Raise Our Valuation on a Higher Data Center and AI Forecast

We raise our fair value estimate for wide-moat Monolithic Power Systems to $600 per share, from $540, behind a higher forecast for the firm's sales into data centers and artificial intelligence applications. MPS’ first-quarter results beat our expectations and second-quarter guidance met our above-consensus model. MPS’ strong data center sales are offsetting weakness in its other end markets and we expect this dynamic to continue through 2024. We like MPS’ position as a disruptor in power chips, which drives share gains and enables the firm to win significant business alongside AI accelerators. We still see shares as modestly overvalued, however.