AI ASIC expectations raised; MediaTek target price increased to NT$7,000

Overview

This report is a company research and rating update on MediaTek from Goldman Sachs. The core conclusion is that expectations for MediaTek's AI ASIC business have strengthened further, recent results and guidance exceeded expectations, and its next-generation AI ASIC project is progressing as planned; therefore, the Buy rating is maintained and the target price is raised.

Core views

Goldman Sachs believes MediaTek is transitioning from a traditional smartphone application processor supplier to an AI-focused supplier, with growth driven by increasing share in high-end 5G flagship SoCs, rapid scaling of its AI ASIC business, and new TAM in automotive and computing. Management's upward revisions to 2027 AI ASIC SAM and market share imply potential 2027 AI ASIC revenue of US$12bn-US$16bn; Goldman Sachs maintains its higher 2027E AI ASIC revenue forecast of US$20.3bn and expects it to reach US$52.5bn in 2028E.

Analysis framework

The report combines analysis of the company's 2Q26 analyst meeting, 3Q26 guidance, AI ASIC project progress, revisions to revenue and margin forecasts, and a P/E valuation framework. The target price uses a 25x target P/E applied to Goldman Sachs' 2H27E-1H28E EPS.

Methodology notes

• Valuation methodsP/E multiple valuation

  25x target P/E applied to FY2H27E-1H28E EPS

  Goldman Sachs applies a 25x target P/E to 2H27E-1H28E EPS to derive a 12-month target price of NT$7,000; this multiple is 1.8 standard deviations above the five-year average forward P/E.

• Factor frameworkGS Factor Profile

  Growth, Financial Returns, Multiple and Integrated composite factors

  Goldman Sachs' factor framework compares stocks' characteristics with the broader market and industry peers across growth, financial returns, valuation multiples, and composite percentiles.

• M&A frameworkM&A Rank

  M&A Rank 3

  Goldman Sachs assigns MediaTek an M&A Rank of 3, indicating a low probability of acquisition and excluding it from the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MediaTek (2454.TW)

  Core covered security

  Strengths

  Upwardly revised AI ASIC revenue expectations, smooth progress on the next-generation project, better-than-expected 2Q26 results and 3Q26 guidance, and high long-term revenue and earnings CAGRs.

  Weaknesses

  Management describes AI ASIC gross margin as slightly below the company average, while traditional smartphone demand may remain volatile.

  Comparison

  Relative to traditional smartphone AP suppliers, Goldman Sachs views MediaTek as an IC design company making a clearer expansion into AI ASIC, automotive, and computing markets.

  Risks

  End-market smartphone demand weaker than expected, rising wafer foundry costs, intensifying competition, and slower-than-expected ASIC ramp-up.

Key data

• 12-month target priceNT$7,000Raised from NT$6,800 previously.
• Current share priceNT$3,555Price disclosed on the report cover.
• Implied upside96.9%Based on the target price and current price.
• 2027 AI ASIC SAMUS$80bnRaised by management; previously US$70bn-US$80bn.
• 2027 AI ASIC target market share15%-20%Previously 10%-15%, implying potential revenue of US$12bn-US$16bn.
• Goldman Sachs' 2026E AI ASIC revenue forecastUS$2.2bnSlightly raised from US$2bn.
• Goldman Sachs' 2027E AI ASIC revenue forecastUS$20.3bnUnchanged, expected to represent 48% of revenue.
• Goldman Sachs' 2028E AI ASIC revenue forecastUS$52.5bnUnchanged, expected to represent 68% of revenue.
• 3Q26 revenue guidanceNT$152.2bn-NT$159.8bnThe midpoint is above Goldman Sachs' and Bloomberg consensus expectations.
• 2Q26 EPSNT$15.28Above Goldman Sachs' forecast of NT$12.74 and consensus of NT$14.11.

Impact & implications

The report suggests that MediaTek's investment thesis is being re-rated from a smartphone cyclical stock to a long-term AI ASIC growth stock. If the AI ASIC project enters production as planned in 4Q26 and the next-generation project reaches high-volume production in 2028, the revenue mix, operating leverage, and valuation multiple could all receive support.

Risks

• End-market demand, including smartphones, is weaker than expected.
• Rising wafer foundry costs weigh on margins.
• Intensifying competition causes profitability to decline.
• AI ASIC ramp-up is slower than expected, weakening operating leverage.
• Execution of second-generation AI ASIC mass production, yields, packaging, or substrates falls short of expectations.

What to watch

• Progress toward production of the first AI ASIC project in 4Q26.
• Realization of 2027 AI ASIC SAM, market share, and customer demand.
• Tapeout, packaging, substrate yields, and progress toward high-volume production of the second-generation AI ASIC in early 2028.
• Whether 3Q26 revenue, gross margin, and expense ratio are in line with guidance.
• Whether AI ASIC gross margin improves with increasing silicon content, chip size, and packaging integration.