Monolithic Power Systems, Inc. (MPWR): A Bull Case Theory

We came across a bullish thesis on Monolithic Power Systems, Inc. on The Wealth Dynasty Report’s Substack. In this article, we will summarize the bulls’ thesis on MPWR. Monolithic Power Systems, Inc.'s share was trading at $1,124.15 as of January 30th. MPWR’s trailing and forward P/E were 30.35 and 54.35, respectively according to Yahoo Finance.

Monolithic Power Systems (MPWR) designs the power management chips that enable efficient energy conversion across a wide range of applications, from consumer electronics and electric vehicles to AI-driven data centers. Operating as a fabless semiconductor company, MPWR focuses on design and innovation while outsourcing manufacturing, allowing it to maintain a lean cost structure and strong margins.

Roughly 93% of revenue originates from Asia, where its chips are integrated into products shipped globally. In 2024, the company benefited from powerful secular tailwinds, with enterprise data revenue surging 122% as hyperscalers such as Amazon and Microsoft adopted MPWR’s solutions for AI servers, while automotive revenue expanded sharply alongside rising electric vehicle content and new clean-energy offerings like silicon carbide inverters. This evolution reflects a shift from discrete components toward more integrated power solutions.

Financial performance underscored this momentum, with revenue rising 21% year over year to $2.21 billion and fourth-quarter sales up 37%. While reported net income was inflated by a one-time tax benefit, normalized non-GAAP earnings of roughly $11.78 per share still point to robust profitability. MPWR pairs growth with shareholder returns, completing a $640 million buyback, raising its dividend 25%, and returning the majority of free cash flow to investors over the past three years. Its balance sheet is a key differentiator, featuring exceptional liquidity, a current ratio above 6, nearly $900 million in cash and short-term investments, and zero debt.

At around 25x normalized earnings, the stock trades at a premium to history and peers, but this is supported by best-in-class margins, accelerating exposure to AI and automotive markets, and a long runway for earnings growth. While risks include valuation sensitivity, cyclical demand swings, and geopolitical exposure in Asia, MPWR’s financial strength and competitive positioning underpin an attractive long-term risk-reward profile, with upside driven by sustained growth in high-value power management applications.

Previously, we covered a bullish thesis on Monolithic Power Systems, Inc. (MPWR) by Hidden Market Gems in April 2025, which highlighted the company’s macro-driven selloff, reasonable valuation, fabless model, and differentiated exposure to AI without chasing peak multiples. MPWR’s stock price has appreciated by approximately 100.08% since our coverage as the thesis played out. The Wealth Dynasty Report shares a similar view but emphasizes balance sheet strength, capital returns, and long-term earnings durability.

Monolithic Power Systems, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held MPWR at the end of the third quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of MPWR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MPWR and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.