Chipmaker STMicroelectronics (STM) has teamed up with Amazon’s (AMZN) cloud unit AWS to launch new photonics chips, targeting the AI data center boom. ST’s new chips, which use light instead of electricity, are designed to boost speed and lower power consumption in transceivers, the converters required in large numbers for advanced AI data centers.
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Yesterday, STM stock gained over 8% after Jefferies upgraded its rating to Buy and raised its price target by 47%, from €23 to €34. Jefferies cited normalized operations following inventory corrections, increased demand for Apple’s (AAPL) iPhone 17 components, and a rebound in industrial activity as reasons for a Buy rating.
ST Gears Up for Explosive Chip Demand
As leading U.S. software companies are set to invest $500 billion in AI infrastructure under the Stargate project, chip demand is expected to skyrocket. This massive spending is driving up demand not only for Nvidia’s (NVDA) specialized computing chips but also for chips used in memory, power, and communications applications.
Consequently, STMicroelectronics is well-positioned to seize this opportunity with new chips designed to boost data center performance for AI tasks. The company is developing advanced optical connections that use light to transfer data between computers, making these systems faster and more energy-efficient—a crucial advantage as AI computing demands continue to surge.
Additionally, the collaboration between STMicroelectronics and Amazon brings together two industry leaders. STMicroelectronics contributes its expertise in chip design and manufacturing, while Amazon brings deep knowledge of cloud infrastructure and data management. Together, they aim to create a product that not only meets current data center demands but also sets the stage for future growth in the sector.
Is STM a Good Stock to Buy Right Now?
According to TipRanks, STM stock has a Hold consensus rating based on two Buys and six Holds assigned in the last three months. At $25.69, the STMicroelectronics average share price target implies a downside of 3%.
Year-to-date, STM stock has gained 6%.
