MediaTek-Nvidia partnership draws analyst upgrades amid custom AI chip push

Wood Mackenzie: U.S. grid curbs may slow data-center buildout

Morgan Stanley analysts said the deeper MediaTek-Nvidia alliance could help the Taiwanese chip designer win a second or third cloud-service-provider customer for its custom-chip business, providing potential upside to its long-term AI revenue outlook. The brokerage maintained its overweight rating and noted MediaTek could benefit from a closer relationship with Alphabet on AI chip development.

J.P. Morgan said concerns about MediaTek’s position in Google’s AI-chip supply chain are overdone. The brokerage raised its 2027 and 2028 earnings estimates and lifted its June 2027 price target to NT$5,600 from NT$5,300, citing stronger long-term growth prospects and operating leverage from MediaTek’s custom AI-chip business. J.P. Morgan said MediaTek’s custom AI-chip business could continue growing strongly beyond 2028 as its role in Google’s AI-accelerator programs expands despite rising competition from other chip-design partners.

Bernstein analysts described the broadened collaboration as positioning MediaTek as “a bridge” between Nvidia and custom AI chip customers. By adopting Nvidia’s platform to assist customers in developing custom AI processors, clients can scale from silicon to rack with custom chips guaranteed to work seamlessly with Nvidia’s GPUs, the analysts said. The arrangement should be particularly attractive to small and early custom-chip clients that want to focus on silicon first and leverage the Nvidia platform to scale to system quickly, they added.

Citi analyst Laura Chen said the deal makes MediaTek “a much more credible custom artificial-intelligence chip contender after Nvidia’s strategic investment.” Chen said the deepening alliance could turn MediaTek into one of the principal custom-silicon design platforms inside the broader Nvidia ecosystem. The expanded collaboration now gives MediaTek AI growth opportunities in three areas: custom AI chips, AI PCs and physical AI, Chen added.

TF International Securities analyst Ming-Chi Kuo said the companies’ repeated references to “rack-scale” systems signal MediaTek’s shift beyond chip design. By plugging custom chips and XPUs into Nvidia’s established rack-scale ecosystem, MediaTek can accelerate deployment in AI factories and data centers without building a systems platform from scratch, Kuo said.

Counterpoint Research said Nvidia’s investment in MediaTek’s convertible bonds is “less a traditional partnership and more a strategic effort” to help develop AI chips that work seamlessly with Nvidia’s computing platforms. The deal could help Nvidia extend its influence beyond GPUs into the broader AI supply chain while benefiting from MediaTek’s growing relationships with major cloud companies including Google and Meta, the research firm added.

In storage, TrendForce said revenue at the world’s top five enterprise-SSD suppliers more than doubled from the previous quarter in the second quarter. Demand is expected to remain strong in the third quarter, driven by wider adoption of generative AI services, continued cloud infrastructure spending and shipments of certain Nvidia AI server racks. Samsung remains the market leader, followed by SK Hynix and Micron, which posted the fastest growth among the top five, TrendForce said.

Separately, Wood Mackenzie reported that a new U.S. executive order could affect more than $22 billion of bulk-power equipment imports since 2025, with China accounting for nearly all impacted imports. The biggest impact is expected in transformers above 100 MVA, where demand has surged alongside data-center growth. Uncertainty remains over whether data-center loads will fall under the order, with the Department of Energy expected to clarify implementation within 120 days.

In other Asian tech notes from the roundup, Daiwa analyst John Choi said “AI is already helping improve user engagement, operating efficiency and monetization” in Tencent’s core gaming and ads businesses, while its AI productivity tools have seen increasing subscriptions. Daiwa said investors are currently paying primarily for Tencent’s established core franchises given limited scope for potential monetization from its agent-AI tools, and noted Tencent has a US$130 billion investment portfolio providing financial flexibility. Tencent currently has no plans for an equity issuance, Daiwa said.

Citi analysts said sales forecasts for Xiaomi’s Skynomad SUV line and the upcoming launch of the Xiaomi 18 smartphone should be near-term catalysts for the stock, while third-quarter forecasts may be an overhang. Xiaomi reported August EV deliveries exceeded 30,000 units, with year-to-date shipments totaling more than 246,000 units, or more than half of Citi’s 2026 estimate of 450,000 units.

Kenanga IB analyst Cheow Ming Liang said Inari Amertron’s FY2027 earnings recovery is expected to strengthen, driven by stronger radio-frequency production for the coming smartphone cycle and faster growth in its photonics business. Kenanga raised Inari’s target price to 2.77 ringgit from 2.72 ringgit, maintaining an outperform rating, with shares last 3.1% higher at 2.64 ringgit.

Maybank IB analyst Tan Chi Wei said Axiata associate XLSmart’s losses are expected to narrow further in the second half as accelerated depreciation tapers. Maybank cut Axiata’s target price to 2.75 ringgit from 2.90 ringgit to reflect a lower valuation for associate CelcomDigi, maintaining a buy rating, with shares last 3.3% lower at 1.76 ringgit.

The convertible bond backing translates the multi-year AI expansion thesis that Citi analysts identified in early August, when Taiwan’s tech earnings confirmed a broadening of AI infrastructure investment, into named dollar figures and named partners. As covered in our August 3 reporting, that earlier note flagged MediaTek among the Taiwan chip companies whose improved guidance and capital spending supported the broadening, which today’s announcements now extend with concrete Nvidia and Alphabet financial backing.