We recently published a list of 10 Tech Stocks with High Upside Potential. In this article, we are going to take a look at where Monolithic Power Systems, Inc. (NASDAQ:MPWR) stands against other tech stocks with high upside potential.
As per Forrester Research, Inc., despite persistent inflation, the US real GDP is expected to increase 2.7% in 2025 and the US tech spending is projected to see growth of 6.1% to touch a staggering $2.7 trillion. The software spending in the US is expected to increase by 10.7% in 2025. With the escalation in cybersecurity risks, companies continue to leverage cloud and GenAI technologies to fuel future growth and innovation.
AI to Drive Growth in Tech Sector in 2025
The largest US stocks, also referred to as the Magnificent 7, have seen a strong run over the previous 2 years, mainly due to the buildout of AI infrastructure, says Goldman Sachs. Sung Cho, co-head of US Fundamental Equity in Goldman Sachs Asset Management. Cho believes this buildout can significantly benefit data and security companies, and software companies successfully integrating AI in their existing product set. As the Fed continues to cut rates, the smaller tech companies – which saw contraction in their multiples because of higher rates – might see a favourable macro backdrop.
UBS has highlighted how AI has and will continue to drive the growth of the broader technology sector. As per the firm, since the rollout of ChatGPT in November 2022, the total market capitalization of companies listed on the US technology exchange NASDAQ increased to ~US$13.5 trillion. Notably, around two-thirds of this value increase has been directly caused by the AI sector. Moving forward, the decisive factor is expected to be the extent to which significant investments in AI-based infrastructure can be translated into profitable business models.
While highlighting the consensus estimates, UBS stated that the 4 major US technology corporations are projected to invest ~US$280 billion in AI this year. Given the increased usage of this key technology across industries, value creation processes are expected to be optimized. This can lead to significant productivity gains. One such area is the market for robotics and automation, which is expected to reach a sales volume of ~US$350 billion in 2025, says UBS analysts. Notably, humanoid robotics will be the key area of particular interest because of the innovations.
Our Methodology
To list the 10 Tech Stocks with High Upside Potential, we used a screener and shortlisted the stocks catering to the broader technology sector. Next, we filtered out the stocks having an average upside potential of at least ~30%, as of February 28. Finally, the stocks were arranged in ascending order of their average upside potential. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Monolithic Power Systems, Inc. (MPWR) the Tech Stock with High Upside Potential?
An engineer examining a DC to DC integrated circuit board, looking for any flaws.
Monolithic Power Systems, Inc. (NASDAQ:MPWR) is a critical player in the technology sector as it designs, supplies and develops high-performance power solutions which are used in a range of electronic applications. As per Stifel analyst Tore Svanberg, the company is well-placed to benefit not only as a critical power management supplier for AI infrastructure, but also as the supplier of a diverse suite of products aiming at multiple end markets. Monolithic Power Systems, Inc. (NASDAQ:MPWR) highlighted that its proven, long-term growth strategy is intact as it continues to transform from being a chip-only, semiconductor supplier to a full service, silicon-based solutions provider.
The company’s innovation pipeline is strong, thanks to the introduction of products like a silicon carbide inverter for clean energy applications and a new line of automotive audio products using DSP technology. Moving forward, Monolithic Power Systems, Inc. (NASDAQ:MPWR)’s diversified growth strategy, continued product innovation, and healthy financial position are expected to drive growth. Furthermore, with the growth of the technology sector, there will be increased demand for high-performance power management solutions. Monolithic Power Systems, Inc. (NASDAQ:MPWR), because of its strong R&D, high-margin business model and energy-efficient solutions, appears to be well-placed to capitalize on such megatrends.
Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Monolithic Power Systems, Inc. (NASDAQ:MPWR) designs high-performance power management solutions, leveraging its expertise in analog design, proprietary process technologies, and system-level applications. Its fabless manufacturing model enables nimble innovation and scalability without requiring the high volumes typical of peers with internal manufacturing. The company serves diverse end markets, including enterprise data, where it has been the sole supplier of power management integrated circuits (ICs) for Nvidia’s AI chips since early 2023, driving significant growth. However, recent reports of potential share loss on Nvidia’s Blackwell platform due to technical issues, which management refutes, have raised some concerns. While management acknowledges the eventual introduction of additional suppliers, we believe these fears are overblown.”
Overall, MPWR ranks 10th on our list of tech stocks with high upside potential. While we acknowledge the potential of MPWR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than MPWR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
