Semtech Corporation (SMTC): A Bull Case Theory

We came across a bullish thesis on Semtech Corporation on X.com by @TheValueist. In this article, we will summarize the bulls’ thesis on SMTC. Semtech Corporation's share was trading at $67.13 as of December 17th. SMTC’s trailing and forward P/E were 119.86 and 30.77 respectively according to Yahoo Finance.

Semtech Corporation provides semiconductor, Internet of Things systems, and cloud connectivity service solutions in the Asia- Pacific, North America, and Europe. SMTC is undergoing a significant strategic transformation from a leveraged, mixed semiconductor and IoT systems company into a more focused, higher-margin analog signal-integrity and sensing franchise tied to AI data centers and low-power IoT.

Recent results and management commentary indicate that the balance sheet repair following the Sierra Wireless acquisition is largely complete, execution across core assets has stabilized, and attention is now squarely on unlocking earnings power from data center signal integrity, LoRa IoT, and sensing, while divesting structurally lower-margin IoT systems assets.

The data center business has emerged as the primary value driver, with record revenue, 60%+ semiconductor gross margins, and clear visibility from sustained 800G optical demand, upcoming 1.6T ramps, and early adoption of low-power architectures such as LPO and ACC. While ACC and LPO remain debated due to architectural uncertainty and hyperscaler adoption curves, even conservative assumptions leave room for upside relative to current expectations if deployments broaden beyond initial platforms.

LoRa provides a second, durable growth engine, benefiting from smart metering, connected industrial applications, and new multi-protocol chips that expand addressable markets while maintaining very high margins. At the same time, management is actively pursuing divestitures of low-margin cellular module and connectivity assets, which could lift consolidated gross margins into the 60%+ range and simplify the equity story.

Financially, Semtech has restored profitability, reduced leverage dramatically, and cut interest expense to negligible levels, creating flexibility to reinvest in core growth areas. At current valuation levels, the stock prices in meaningful data center success but still offers asymmetric upside if portfolio pruning is executed well and ACC and LPO adoption track the more bullish industry scenarios, while downside risk is increasingly tied to governance execution and the durability of AI infrastructure spending.

Previously we covered a bullish thesis on Credo Technology Group Holding Ltd (CRDO) by Nikhs in March 2025, which highlighted the company’s AI-driven revenue inflection, expanding margins, and leadership in active electrical cables for hyperscale data centers. The company’s stock price has appreciated approximately by 188.51% since our coverage. This is because the thesis played out. @TheValueist shares a similar perspective but emphasizes balance sheet repair and portfolio simplification at Semtech.

Semtech Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held SMTC at the end of the third quarter which was 37 in the previous quarter. While we acknowledge the potential of SMTC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.