Why Is Navitas Semiconductor Stock Skyrocketing Today?

Shares of Navitas Semiconductor (NASDAQ: NVTS) are soaring on Tuesday, up 27.7% as of 2:57 p.m. ET. The jump comes as the S&P 500 gained 0.2% and the Nasdaq Composite lost 0.3%.

The company, which develops semiconductors using the alternative materials gallium nitride (GaN) and silicon carbide (SiC), said on Monday that it is making substantial progress in designing new chips for Nvidia. Investors were encouraged by the update to the key collaboration announced last spring, and Navitas' stock shot up after Tuesday morning's bell.

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In a statement, CEO Chris Allexandre said that the project was advancing and emphasized the advantages of using alternatives to silicon, saying that "As Nvidia drives transformation in AI infrastructure, we're proud to support this shift with advanced GaN and SiC power solutions that enable the efficiency, scalability, and reliability required by next-generation data centers."

Navitas has competition

The chips that power AI data centers are extremely power-hungry. A substantial improvement in their efficiency would be extremely valuable to Nvidia and the hyperscalers that purchase its chips. Navitas is in a prime position to deliver just that if it can successfully develop the technology, but Navitas is not alone. Nvidia is collaborating with others as well.

At this point, Navitas' stock has a lot of future growth priced in, growth that is anything but guaranteed at this point. If the competition beats Navitas to the punch, its stock will plummet.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.