Ambarella Stock (AMBA) Soars as It Explores a Potential Sale

Ambarella (AMBA), a company that designs chips for video and image processing, is reportedly exploring various strategic options, which include the possibility of selling itself. According to Bloomberg, the company is working with bankers and has already reached out to potential buyers. These could include rival chipmakers that want to expand their automotive technology offerings, or private equity firms looking for investment opportunities. The news sent Ambarella’s stock up as much as 20% at one point. However, the discussions are still in the early stages, and there’s no guarantee that a sale or deal will happen.

It is worth noting that the company makes semiconductors that are used in things like security cameras and self-driving cars. Although it hasn’t posted a full-year profit since 2017, analysts expect Ambarella’s revenue to grow by 28% in 2025. The company credits this growth to the rising demand for “edge AI” products, which are chips that run AI-powered video recognition close to where the video is recorded. These products now make up about 75% of the firm’s sales and have helped it enter new areas like industrial automation, video conferencing, and 360-degree consumer cameras.

Interestingly, the chip industry has seen a rise in deal-making recently, which may be influencing Ambarella’s strategy. Notable transactions include SoftBank’s (SFTBF) $6.5 billion acquisition of Ampere Computing in March and Intel’s (INTC) sale of a majority stake in Altera to Silver Lake in April. While Ambarella is gaining momentum in AI-related markets, one concern is that it is heavily dependent on a single customer, Taiwan-based WT Microelectronics, which distributes its products and accounts for more than 60% of its total revenue.

Is AMBA Stock a Good Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on AMBA stock based on seven Buys, four Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average AMBA price target of $80.33 per share implies 33.7% upside potential.

See more AMBA analyst ratings