Navitas Semiconductor: A Short Thesis on Overvaluation Amid Tariff and Competitive Risks

Navitas Semiconductor Corporation (“Navitas”), maker of gallium nitride (“GaN”) and silicon carbide (“SiC”) power solutions, has been riding high on investor optimism in recent months. The stock has been trading at 28.8x 2025 sales since announcing its non-exclusive collaboration with Nvidia to supply power solutions for the 800 Volt Data Center (“800 VDC”) architecture starting 2027 – a sizable jump from about 7x prior. Its current valuation significantly outpaces comparable peers like Alpha and Omega Semiconductor (“AOSL”) at 1.6x NTM P/S, and even profitable peer Monolithic Power Systems (“MPS”) at 11.6x NTM P/S.

However, this premium valuation fails to price in a critical catalyst – namely, 100% semiconductor tariffs on GaN wafers produced at Taiwan’s Powerchip Semiconductor Manufacturing Corporation (“PSMC”) starting 1H26. With Navitas’ 11% U.S. revenue mix ($6.3 million of $57 million projected for 2026) exposed to these tariffs, the resulting cost increases threaten to deepen losses, accelerate cash burn, and trigger dilutive financing. This risks a valuation reset akin to power semiconductor peer Wolfspeed’s collapse from 10x to 1x NTM P/S post-Chapter 11 bankruptcy filed in June. Intensifying competition and macro headwinds risk further amplifying this downside, making Navitas’ price of $6.60 as of August 11 close a compelling short opportunity.

100% Semiconductor Tariffs: The Catalyst for Re-Rate

While Navitas doesn’t bifurcate its revenue disclosure by product, management commentary in the past has provided clarification that the bulk of the company’s sales are generated from its GaN portfolio. Meanwhile, Navitas’ SiC products currently represent only a nominal share of its revenue mix, with the majority generated from sales to China.

While SiC represents a minority of our total revenue, our products are produced in the U.S. at [X-FAB] and the majority is sold in China…We anticipate GaN revenues, which represent the significant majority of our revenue today, to have a very limited direct impact from tariffs as our GaN products are manufactured in Taiwan and are sold predominantly outside the U.S. – Navitas Q1 2025 Earnings Call Transcript

TSMC, Navitas’ current sole GaN wafer supplier, has announced it will cease GaN production on July 31, 2027. This has prompted Navitas to transition its GaN wafer production to PSMC starting 1H26. The company will first start with ramping 80-200V GaN at PSMC’s 8-inch Fab 8B in Taiwan, then introduce its higher voltage GaN products to the mix over the next two years. Unlike TSMC, which has committed significant investments into building out its U.S. manufacturing capacity, PSMC’s capacity remains limited to Taiwan. This accordingly makes its GaN exports to the U.S. vulnerable to 100% semiconductor tariffs recently proposed under the Trump administration. With at least 11% of Navitas’ 2026 revenue (~$6.3 million) tied to U.S. sales – potentially more when GaN supplies to Nvidia start to ramp – these tariffs could add $6.3 million to the company’s annual costs.

At about 37% GAAP gross margin in Q2, excluding the one-time $3 million SiC inventory reserve, U.S. gross profit estimated for 2026 could reach $2 million. But tariffs risk erasing this gain by introducing an additional $6.3 million cost headwind. Not only is the set-up expected to worsen Navitas’ losses, but passing on the additional costs to customers could risk demand erosion, as competition limits pricing power (further discussed in later sections).

Although Navitas’ 60% Hong Kong revenue mix mitigates some exposure, the company’s current tariff headwinds faced in China could be proxy for upcoming challenges to its fundamental outlook if the 100% semiconductor duties are applied to U.S. sales. Navitas currently generates about 12% of its revenue from China, generated primarily from SiC sales. Since Navitas currently produces its SiC wafers at X-FAB in the U.S., related shipments to China have been subject to the region’s 10% tariffs. This has caused management to take a $3 million reserve on SiC inventory in Q2, accompanied by a projected 50% y/y decline in Q3 revenue to $10 million due to soft demand in China EV and industrial markets as “customers wait for improved economic indicators”.

And implications from the 100% tariffs on PSMC GaN wafers imported from Taiwan starting next year will likely be worse. Although Navitas is also “evaluating additional suppliers to enhance supply chain resilience”, which could include U.S.-based manufacturers, PSMC’s scale likely makes it the company’s primary GaN production partner in the foreseeable future. This is consistent with Navitas’ increasing focus on higher voltage GaN solutions, such as its GaNSafe ICs that currently require 200mm technology. GlobalFoundries is currently the only U.S.-based foundry offering external volumes for 200mm GaN wafer manufacturing at scale in Vermont. But since this capacity is still in early ramp-up, Navitas will likely need to rely on PSMC for the majority of its supply in the upcoming transition to AI data center opportunities. This accordingly locks in incremental tariff risks that could trigger a valuation re-rate by 1H26 for Navitas.

Valuation Disconnect: Premium Multiple, Weak Fundamentals

At 28.8x 2025 sales, Navitas’ valuation today lacks constructive support from its underlying business fundamentals. The multiple also far exceeds its power semiconductor peers. AOSL, which is also an unprofitable fabless GaN solutions provider, currently trades at 1.6x NTM P/S. Even Monolithic Power Systems (“MPS”), which is currently profitable, is only trading at 11.6x NTM P/S. More importantly, Wolfspeed is a cautionary tale in the industry, with its valuation falling from 10x NTM P/S just a year ago to 1x following its Chapter 11 bankruptcy filing in June, highlighting the extent of downside risks facing unprofitable GaN/SiC constituents.

Navitas’ ballooning losses to $49 million in Q2 and fading prospects of 2026 EBITDA breakeven – a target that was reiterated by management during the Q1 earnings update and absent in Q2 – also signals a weak fundamental outlook. This is exacerbated by a sharp reversal in management’s earlier optimism for 2H25 growth acceleration based on $450 million in new design wins in 2024 and a $2.4 billion customer pipeline. This was evidenced in management’s guidance for a 50% y/y decline in Q3 revenue to $10 million, reflecting delays in pipeline conversion due to tariff uncertainties in China. Yet the premium allocated to Navitas’ valuation at current levels continues to ignore these risks – especially with its additional exposure to the impending 100% semiconductor tariffs, which sets the stage for an imminent re-rate.

Cash Burn and Dilution: Tariffs Fuel a Vicious Cycle

Navitas’ current $161.2 million cash balance is accompanied by a $25 million quarterly operating cash burn run-rate, implying a 1.6-year liquidity runway. And its exposure to additional semiconductor tariffs starting next year could potentially increase this cash burn by $6.3 million to $106 million, shrinking its liquidity runway to under 1.5 years. This could necessitate further financing before the early production ramp of its AI-designated productions starting in later 2026.

It's likely Navitas will be incentivized to capitalize on its valuation premium at current levels and issue new shares to raise additional capital. The company had disclosed it’s already raised $97 million in net proceeds by issuing 20 million shares through two separate $50 million-increment at-the-market programs in a recently filed press release. The share sale had triggered a 22% drop in the stock during the week it was executed. Since tariffs are expected to deepen its cash needs, Navitas could potentially tap into another ATM offering. A similar $50 million increment issuance could add 7 to 8 million shares at current prices ($6.60 August 11 close), implying dilution of about 4% alongside additional EPS compression. This accordingly introduces a vicious downward spiral for Navitas – cost increases are expected to erode margins, forcing dilutive share issuances, which will depress the stock’s valuation premium multiple and compress EPS metrics, further fuelling losses and liquidity needs.

Competition: Non-Exclusive Nvidia Deal Limits Upside

Navitas’ valuation premium at 28.8x 2025 sales also overlooks the non-exclusive nature of its collaboration with Nvidia on the next-generation 800 VDC architecture, with competition having only intensified since the initial disclosure in May.

In Nvidia’s original press release in May, it had listed five other silicon providers in addition to Navitas for its 800 VDC architecture.

They included Infineon, MPS, ROHM, STMicroelectronics and Texas Instruments. This list was quietly expanded in late July to include four additional contenders – Analog Devices, Innoscience, OnSemi and Renesas – without an amendment date to the original May 20 press release.

Of these 10 silicon suppliers, eight (excluding ROHM and Analog Devices) have GaN/SiC expertise for AI data center applications. Most of them are IDMs, with some adopting a hybrid manufacturing strategy that includes third-party foundry capacity. These competitors, with their larger revenue bases and R&D budgets, could threaten Navitas’ deal size potential with Nvidia, and limit the company’s pricing power and ensuing margin expansion prospects.

Navitas’ technical moat demonstrated through its GaNSafe ICs, which feature 350ns short-circuit protection and 2kV ESD shielding critical for high-power AI data center applications, is also at risk of being overtaken by competition. The embedded short-circuit protection in Navitas’ GaNSafe ICs is critical in protecting systems under faulty conditions and reducing failure risks. GaNSafe’s 2kV electrostatic discharge (“ESD”) shielding also improves protection and reliability of devices under harsh environments across automotive, industrial and AI data center applications.

However, larger and deeper pocket competitors like Infineon and STMicroelectronics, which are also suppliers of Nvidia’s 800 VDC architecture, are rapidly narrowing this R&D gap. Infineon’s 300mm GaN wafer production – industry’s first – is expected to boast superior yields and additional cost efficiencies, while its U.S.-based manufacturing also mitigates tariff risks. Meanwhile, STMicroelectronics is also advancing integration capabilities in its Sti²GaN product family, underscoring potential catch-up to GaNSafe’s protection features by 2027 when AI data center applications start to ramp.

The mounting competitive pressure against Navitas now risks undermining its potential share of Nvidia’s 800 VDC architecture opportunities. The 100% semiconductor tariff risk on imported PSMC GaN wafers could further limit the cost efficiency of Navitas’ GaNSafe ICs, diluting its appeal against rival offerings that benefit from U.S.-based manufacturing at scale.

Macro Headwinds: Amplifying Tariff Impact

The company’s also been experiencing protracted cyclical pressures across its core EV, solar and industrial end-markets over the past year. This has been further challenged by broad-based U.S.-China trade tensions, with tariff uncertainties potentially curtailing new design wins and delaying related conversions. This is consistent with management’s recent commentary that its China EV and industrial customers are currently awaiting “improved economic indicators”, which limits visibility into its pipeline conversion outlook. The upcoming removal of solar and EV tax credits in September under Trump’s “One Big Beautiful Bill” (“OBBB”) is likely to further obscure recovery prospects across Navitas’ core growth verticals.

Not only does this cloud Navitas’ growth outlook, but it also compounds near-term tariffs in impacting the company’s profit trajectory. Coupled with management’s intensions to “continue investing in next-generation GaN and SiC technology platforms to serve the increasing power consumption across AI data center and energy infrastructure markets”, which entails elevated R&D, the company faces imminent margin deterioration. It’s likely that management’s guidance for EBITDA breakeven by 2026 will be officially retracted, subjecting Navitas’ current valuation at 28.8x 2025 sales to imminent risks of a downward re-rate. Management’s omission of the 2026 EBITDA breakeven target during the Q2 earnings call was likely a cautionary tale.

Valuation Reset: A 44–90% Downside

Navitas’ 28.8x 2025 P/S is unsustainable given tariff risks, extended losses, and intensifying competitive pressures. A correction to 14.5x NTM P/S (aligned with MPS’ profitable growth) implies a 44% downside to ~$3.66. A 7x NTM P/S (peer average, Navitas’ pre-NVIDIA valuation) suggests a 73% downside to $1.82. In a worst-case scenario, mirroring AOSL (1.6x NTM P/S) or Wolfspeed (1x NTM P/S), Navitas could face more than 90% downside to ~$0.42–$0.67, driven by ballooning losses and dilution. Despite the $450 million in new 2024 deal wins and the upcoming Nvidia collaboration, near-term risks outweigh long-term upside at current valuations.

Conclusion

Navitas’ premium valuation ignores a myriad of imminent fundamental risks: 100% U.S. tariffs on PSMC GaN, a 1.6-year cash runway vulnerable to dilution, intensifying competition from larger IDMs, and macro headwinds delaying pipeline conversion. The lack of immediate disclosure pertaining to its material exposure to the upcoming 100% semiconductor tariffs, alongside substantial insider share selling since the announcement of Navitas’ collaboration with Nvidia, also suggests a lack of management prioritization over shareholder interests. With Navitas’ valuation premium formed on weak fundamentals, its risk-reward is evidently scaled to the downside – with its exposure to 100% semiconductor tariffs and intensifying competition serving as an imminent catalysts for correction.

Disclaimer: This analysis is for informational purposes only and represents the opinions of Livy Research. It is not investment advice nor a recommendation to buy or sell the securities discussed.