Navitas Semiconductor (NASDAQ: NVTS) shares continued their upward trajectory in premarket trading Tuesday, reaching approximately $32, a 9.4% increase from Friday's close of $29.25. The stock had surged about 20% in the previous regular session, driven by optimism around its gallium nitride (GaN) and silicon carbide (SiC) power semiconductors for AI data centers.
The rally comes amid disclosures that the company has issued 3,277,438 Class A shares to satisfy 'Triggering Event I' under its 2021 merger agreement, according to a May 22 SEC filing. These earnout shares are contingent on stock price targets, with up to 10 million shares potentially vesting before October 19, 2026. The issuance adds to the share count, potentially diluting existing shareholders.
Additionally, Navitas has settled a dispute with Live Oak Sponsor Partners II regarding sponsor earnout shares from the original SPAC deal. Under the settlement, 726,225 sponsor earnout shares will vest and become freely transferable, while 115,775 shares will be forfeited. Another 421,000 shares had already been counted as earned.
Market Context and AI Bet
The stock's recent gains are tied to the company's positioning in the AI infrastructure space, particularly its power solutions for data centers. Navitas plans to showcase new products at the PCIM 2026 conference in Germany, including a 20-kilowatt 800-volt-to-6-volt board with 97.5% peak efficiency and a 10-kilowatt 800-volt-to-50-volt platform at 98.5% efficiency. Nvidia's push toward 800-volt direct-current power for AI data centers, with plans for 1-megawatt racks starting in 2027, has placed Navitas on its list of silicon providers alongside larger players like Infineon, Onsemi, and Texas Instruments.
Despite the rally, the company remains unprofitable. First-quarter revenue was $8.6 million, up 18% sequentially but down from $14.0 million a year earlier. Navitas reported a net loss of $33.8 million, wider than $16.8 million in the prior-year period, and negative operating cash flow of $16.4 million. Management expects continued operating losses and negative cash flow, though it believes current cash reserves are sufficient for the foreseeable future.
Wall Street Sentiment and Risks
Analyst sentiment remains cautious. The average 12-month price target is $14.46, well below the current trading level. Ratings are mixed: two analysts recommend buy, five hold, and one sell. Needham's N. Quinn Bolton raised his target to $21 after earnings, while Rosenblatt's Kevin Cassidy increased his to $13.
The dilution risk is a key concern. If the stock price continues to rise, more earnout shares could vest, increasing the float and reducing the stake of existing shareholders. The company's market cap currently exceeds $6 billion, a valuation that may be difficult to justify without significant revenue growth from AI data center power solutions.
Investors will watch upcoming events, including the Craig-Hallum conference on May 28 and the Evercore Global TMT Conference on June 3, for further insights. The PCIM product showcase runs June 9-11. The stock's performance at Tuesday's opening will test whether the rally has staying power or if profit-taking emerges after the long holiday weekend.
