Goldman Sachs Reiterates Buy on MediaTek, Target Price NT$5,000

Overview

Following attendance at MediaTek's pre-Computex event, Goldman Sachs issued a research report reiterating its 'Buy' rating and maintaining a target price of NT$5,000. The core thesis is that MediaTek is successfully executing a strategic transition from 'edge to cloud.' Leveraging its leadership in smartphone SoCs and smart home connectivity, MediaTek is extending its compute and connectivity IP into the data center domain, while Agentic AI drives intelligence back to edge devices. Management expects its Total Addressable Market (TAM) to expand from $60-70 billion in 2020 to over $200 billion as generative AI becomes a primary driver of semiconductor demand.

Core views

Data Centers and Custom ASICs as Core Growth Engines. Management reiterated that Data Center/AI ASIC revenue will reach $2 billion in 2026 and maintained the forecast for a total ASIC market size of $70-80 billion in 2027, targeting a 10-15% market share. This confidence stems from accelerated capital expenditure by leading cloud service providers and several major projects won by MediaTek. The report emphasizes that MediaTek is not a new entrant but has been deeply involved in network ASICs since 2015, now possessing full-stack capabilities to develop complex multi-chip solutions. Full-Stack Custom ASIC Capabilities Demonstrate Technical Depth. MediaTek showcased its comprehensive capabilities in SerDes (224Gbps solution ready), XPU (supporting both training and inference, with design scales exceeding 10x reticle size), packaging (supporting TSMC CoWoS and Intel EMIB), and interconnect technologies (UCIe, PCIe, CPO, etc.). This 'one-stop' service reduces customer integration risks and helps increase the value content per design. Furthermore, through collaborations on NVIDIA NVLink Fusion and Microsoft's micro-LED AOC, MediaTek has further solidified its ecosystem position. Strong Growth in Computing and Automotive Businesses. The computing business (covering tablets, Chromebooks, and AI workstations) grew 80% year-over-year, with revenue surpassing $1 billion. Notably, Chromebook CPU market share surged from 8% in 2023 to 30% in 2025, and is projected to exceed 50% in 2026. In the automotive sector, the Dimensity AX platform supports concurrent multi-model inference up to 400 TOPS; its solutions are already adopted in 35 million vehicles, driving a 385% business growth over the past five years. The industry is shifting from software-defined vehicles to AI-defined vehicles, and MediaTek's platform aims to support this trend. Stable Edge Device Foundation, AI Glasses as New Highlight. MediaTek has maintained the number one position globally in smartphone SoC shipments for five consecutive years, with high-end flagship models driving growth; the next-generation flagship will adopt TSMC's N2 process in Q3 2026. In connectivity, WiFi 8 is expected to launch in 2028. The report specifically highlights AI glasses as the next significant edge platform, with global sales projected to grow from 10 million units in 2025 to 100 million units by 2030, where MediaTek holds a natural advantage due to its low-power 3D compute IP.

Analysis framework

Goldman Sachs employed an analytical approach combining 'Sum-of-the-Parts' valuation with a 'Growth Driver Breakdown.' First, by attending the company's technology day, the firm validated management's technical execution capabilities in the data center custom chip domain (such as specific parameters for SerDes and packaging), thereby confirming the credibility of the logic behind its transition from a pure design company to a full-stack solution provider. Second, the company's business was segmented into four sectors: Data Center, Computing, Automotive, and Edge Devices, with each evaluated for market penetration, share changes, and revenue growth rates. Finally, based on expected CAGRs of 40% for revenue and 57% for profits from 2025 to 2028, and combining this with historical valuation ranges, a above-average P/E multiple was applied to determine the target price.

Methodology notes

• Valuation MethodPE/PEG valuation

  Determining target price based on target P/E multiple

  The report applies a target P/E ratio of 25x (1.8 standard deviations above its 5-year average trading price) to the expected earnings per share for the second half of 2027 to the first half of 2028 to calculate the target price. This reflects the valuation premium logic of the market for high-growth technology stocks.

• Industry/Sector Analysis Framework

  TAM (Total Addressable Market) Expansion Analysis

  Analyzing how technological shifts (such as Generative AI) open up new application scenarios, thereby driving up the industry's overall total addressable market. The report points out that MediaTek's TAM is expanding from $60-70 billion to over $200 billion, which is a key macro assumption supporting its long-term growth logic.

• Competition & Strategy FrameworkMoat / competitive advantage

  Full-stack technical capabilities building competitive barriers

  The report emphasizes that MediaTek not only provides XPU designs but also offers a complete technology stack including SerDes, packaging, and interconnects. This 'one-stop' capability reduces customer system integration risks and complexity, constituting a competitive advantage (moat) that distinguishes it from pure design companies.

Asset mapping & comparison

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

• MediaTek (2454.TW)

  Direct beneficiary; core logic lies in the volume ramp-up of AI ASIC business and the intelligent upgrade of edge devices

  Strengths

  Full-stack custom ASIC capabilities (SerDes/Packaging/Interconnect), #1 globally in smartphone SoCs, rapid Chromebook share gain, tight ecosystem collaboration with NVIDIA/Microsoft

  Weaknesses

  Rising foundry costs may impact profit margins; intensifying market competition could lead to pricing pressure

  Comparison

  Compared to pure design companies, possesses deeper system-level integration capabilities; compared to IDM giants, more flexible in customized services

  Risks

  Terminal demand below expectations, ASIC ramp-up slower than expected, competition leading to declining profitability

Key data

• 2026 Data Center/AI ASIC Revenue Guidance$2 billionManagement reiterated this target, indicating certainty in the business ramp-up
• 2027 ASIC TAM and Target Share$70-80 billion / 10-15%Based on accelerated capex by leading cloud providers and a strong pipeline of new projects
• Chromebook CPU Market Share2023: 8% -> 2025: 30% -> 2026E: >50%Kompanio series rapidly capturing market share due to performance and battery life advantages
• 2025-2028E Revenue/Profit CAGR40% / 57%Goldman Sachs forecast, primarily driven by increased high-end smartphone share, AI ASIC volume ramp-up, and expansion into new fields
• Automotive Business Growth (Past 5 Years)385%MediaTek solutions already adopted in 35 million vehicles
• 2030 AI Glasses Sales Forecast100 million units/year2025 base is approximately 10 million units; viewed as the next-generation edge platform

Impact & implications

For MediaTek, this implies its valuation logic is being重构 (reconstructed) from a traditional cyclical consumer electronics stock to a high-growth AI infrastructure stock. The volume ramp-up of the data center business will significantly elevate its revenue scale and profit margin ceiling. For the industry, MediaTek's rise in the custom ASIC domain indicates that, besides giants like NVIDIA, second-tier vendors with full-stack capabilities can also capture a share of the hyperscale data center supply chain, particularly in non-core compute units and interconnect solutions. Investors should monitor whether the synergy from edge to cloud can continue to translate into financial performance.

Risks

• Terminal demand for smartphones and other devices weaker than expected
• Rising wafer foundry costs impacting profit margin outlook
• Intensified competition leading to changes in pricing dynamics, thereby affecting profitability
• ASIC business ramp-up slower than expected, impacting operating leverage

What to watch

• Whether 2026 Data Center/AI ASIC revenue reaches $2 billion as scheduled
• Whether Chromebook CPU market share can break through 50% in 2026
• Commercialization progress and shipment volumes of new edge platforms like AI glasses
• Changes in penetration rates of high-end smartphone SoCs in flagship models