Semtech locked in Tower wafer capacity and a $2.1 billion data-center target; the stock fell 10%
On October 13 Semtech agreed to fund dedicated germanium wafer capacity at Tower Semiconductor across three countries; two days later it raised guidance and set a $2.1 billion data-center target for 2030. The stock closed down 10% anyway, at 97 times earnings.
Vincent Jiang · 3 min read
On October 13, Semtech−2.23% — Semtech, down 2.23 percent today agreed to fund dedicated silicon-germanium capacity at Tower Semiconductor's fabs in the United States, Israel and Japan, turning a 20-year manufacturing relationship into a multi-year reservation. 1 Two days later it raised guidance and set a 2030 target. 2 The stock still closed down 10.01% at $144.21. 3
A 20-year partnership becomes a reservation
Silicon germanium is the material behind the analog front end that drives the signals on optical links and active copper cables between AI racks. 1 Tower (Nasdaq: TSEM), an Israeli foundry, runs the wafer process; Semtech (Nasdaq: SMTC) designs the amplifiers and equalizers built on it and will invest to hold capacity in all three regions. 1 "Connectivity is now a primary factor in how far AI systems can scale," chief executive Hong Hou said. 1 Tower's shares closed up 2.6% that day. 4
A 2030 target with booked demand under it
At its October 15 analyst day, Semtech lifted its fiscal third-quarter outlook to $417.5 million of net sales and $1.14 of adjusted earnings per share, from $410 million and $1.05. 2 Its fiscal year ends in January, so this is the quarter now closing. The 2030 framework sets $3.2 billion of sales, $2.1 billion of it from data centers growing 75% a year; blended growth is 38%, with LoRa, its slower internet-of-things radio line, at 30%. 2 The filing labels the 2030 figures targets and goals, not guidance. 2
Under it, the base is contracted: data-center revenue hit a record $100 million in the July quarter, up 91% year over year and guided up another 45% this quarter, and management expects $475 million of it this fiscal year and $1 billion the next. 56 The backlog is fully booked through fiscal 2027 and already covers more than 70% of the fiscal 2028 target. 5
Data-center revenue: $475M this year, $1B next, $2.1B by 2030
- Data center revenue
- Estimate
Data
| Data center revenue | |
|---|---|
| FY27 (estimate) | $475M |
| FY28 (estimate) | $1,000M |
| FY30 (estimate) | $2,100M |
Ten straight quarters of rising sales, and the raised guide steps the line to $417.5M
- Net sales
- Estimate
Data
| Net sales | |
|---|---|
| Q1 '24 | $206.11M |
| Q2 '24 | $215.36M |
| Q3 '24 | $236.83M |
| Q4 '24 | $251M |
| Q1 '25 | $251.06M |
| Q2 '25 | $257.59M |
| Q3 '25 | $266.97M |
| Q4 '25 | $274.36M |
| Q1 '26 | $291.02M |
| Q2 '26 | $341.87M |
| Q3 '26E (estimate) | $417.5M |
The multiple did the falling
Sales have risen ten straight quarters to the July quarter's record $341.9 million, reported in August, and the new guide sits 22% above it. 78 The stock slid nearly 17% intraday anyway, closing at 97 times earnings and a $13.7 billion market value, after a year that ran from $60.28 to $201.99. 3910
The day turned on one question: can 38% blended growth carry 97 times earnings. Traders said no, and MACOM, a rival in analog connectivity, fell more than 10% in sympathy before closing down 6.5%. 910 Analysts at BMO Capital said yes, raising their target from $155 to $230 the same week. 10 The company ended the week with reserved capacity and a booked backlog; the market compressed the multiple, and the stock slipped again Friday to $141.03. 6
The supplier reports first
Tower posts third-quarter results with fourth-quarter guidance on November 2, the first outside reading on whether the reservation is pulling wafers through the foundry. 4 Semtech's own raised quarter closes at the end of October, with the report to follow and no date posted as of Friday. 7 The tell either way is whether data-center revenue keeps compounding above that 38% blended curve.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
