Navitas Semiconductor Co., Ltd. shares (NVTS 21.77%) The stock soared as much as 24.6% on Monday, but had settled to a 20.4% gain as of 2pm ET.
There was no company-specific news from Navitas today, but there was news on the geopolitical side related to semiconductors. Apparently, Navitas investors took this development positively.
Biden administration takes steps to protect U.S. semiconductor companies
The Biden administration on Monday launched an investigation into the practices of Chinese semiconductor companies in critical industries. Most of the chips in question are trailing edge chips based on silicon carbide (SiC) and gallium nitride (GaN) materials. Although they are “less advanced” than, say, AI chips, these types of semiconductors are increasingly being integrated into critical systems in automotive, industrial, medical devices, telecommunications, defense, and other critical applications.
These cutting-edge chips, based on SiC or GaN materials, are exactly the kind of chips Navitas makes. As a result, Navitas rose along with other semiconductor stocks on the cutting edge of news.
But most chip companies in this space didn’t rise as quickly as Navitas. This is likely because Navitas is a smaller company, has higher risk, and has a much larger annual decline than the larger players in the space. With the industrial and automotive semiconductor markets in deep recession, the stock has taken a hit, dropping more than 50% in 2024. Navitas’s short interest was also very high at 18.8% at the end of November, perhaps contributing to some of the short squeeze today.
Should you bet on a reversal?
Despite today’s gains, Navitas remains a risky bet. The company has never been profitable and will continue to be subject to large fluctuations based on factors outside of its control, such as interest rates and geopolitics. Additionally, Navitas sells to Chinese device makers, so it could suffer real damage if China retaliates against U.S. chip companies.
It’s entirely possible that a decisive turnaround in the industrial, automotive, and mobile chip sectors could send Navitas stock soaring, but there are some low-risk ways to play out that scenario.
Billy Duberstein and/or his clients have no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
