Monolithic Power: Attractive Growth, Financial Strength
Monolithic Power Systems (MPWR) presents a particularly compelling investment opportunity. Not only is it an Nvidia AI megatrend beneficiary (enabling energy-efficient semiconductor technologies), but it’s an enormously profitable (81% net margin), strong-balance sheet, dividend-growth powerhouse that is currently trading at an attractive price. In this report, I review the business, market opportunity, growth, valuation, dividend and risks, and then conclude with my strong opinion on who may want to consider investing, and how.
About the Business
Monolithic Power designs integrated circuits (IC) to manage power for electronics/semiconductors (such as those used for cloud computing via data centers, Artificial Intelligence (“AI”) and automobile infotainment systems). Its mission is “to reduce energy and material consumption to improve all aspects of quality of life.”
Importantly, MPWR uses a “fabless” business model, whereby manufacturing is outsourced, thereby providing flexibility and cost efficiency (and helping it navigate the current “tariff environment” more efficiently than others, more on this later).
Market Share & Total Addressable Market (TAM)
MPWR competes in the analog and mixed-signal semiconductor market (particularly in power management ICs) with industry leaders like Analog Devices (ADI), Texas Instruments (TXN), and ON Semiconductor (ON). However, it has carved out a niche for itself in applications requiring compact, efficient power solutions, such as AI data centers and electric vehicles (EVs). Its a growing market space, as you can see in the chart below.
The global power management IC market is projected to grow from $40.8 billion in 2024 to over $79 billion by 2034 (driven by demand for energy-efficient electronics and AI infrastructure). MPWR’s TAM includes computing, automotive, and industrial sectors, with significant growth potential from AI-driven data centers and EV power systems (again, where its solutions optimize performance and reduce energy use).
Growth
Monolithic Power has an impressive growth trajectory, with revenues exceeding $2 billion in the trailing twelve months (“TTM”) as of its May 2025 Q1 earnings release (up from prior years on strong demand in AI, automotive, and enterprise data markets). And it recently reported $4.04 in earnings per share (“EPS”), beating Wall Street estimates by $0.026 (and with Q2 revenue guidance of $640 to $660 million, signaling continuing momentum).
Further, management is targeting 10%-15% revenue growth (above market averages) through 2027 (supported by innovation in silicon carbide and automotive applications). Here is a look at the company’s diverse end markets.
The AI megatrend is a key driver of MPWR’s growth. In particular, its power management ICs are critical for AI servers (because they demand increasingly efficient power delivery to handle increasingly intense computational workloads).
Energy efficiency is another pillar of MPWR’s growth. In particular, its ICs enable smaller, lighter, and more efficient systems, reducing energy waste in data centers, EVs, and other electronic devices. This also aligns well with global sustainability trends and regulatory pushes for lower carbon footprints.
Valuation
MPWR is a hugely profitable business (net margin was recently ~80%—impressive!) and it also has an impressive revenue growth run rate (Wall Street consensus forecasts 20% growth this year and 15% next year). Further, the street believes EPS can grow over 21% per year, on average, for the next 5 years (this is huge) and the shares are currently more than 23% undervalued. Considering the megatrend growth and low valuation, Monolithic Power shares are quite compelling.
The shares also have a consensus “strong buy” rating (1.57 rating) from the 12 Wall Street analysts covering it (see table above).
Risks
Monolithic Power faces a variety of risks that should be considered by investors.
Tariffs pose a significant risk, particularly in light of US-China trade tensions. For example, in April, China imposed a 34% tariff on U.S. semiconductor exports. And as a global player (with supply chain exposure in Asia) this could increase costs and reduce demand if tariffs re-escalate (after temporary tech sector exemptions were announced).
Worth mentioning here, MPWR is fabless, meaning it designs semiconductor components (ICs), but doesn’t produce them. This outsourcing approach gives the company some flexibility in navigating the current tariff environment.
Nvidia (NVDA): MPWR’s relationship with Nvidia (basically the premier industry leader in GPU semiconductors driving the AI megatrend) poses a risk. For example, as you can see in the chart below, MPWR shares fell hard last fall on rumors that it might have lost share in Nvidia's Blackwell line of GPUs to Renesas and Infineon. MPWR remains tight-lipped about its relationship with Nvidia, but the rumors were never substantiated, and the steep share price selloff was healthy (as the shares had experienced quite a run up over the previous year and were trading at a bit frothy levels then).
The valuation is much more reasonable (attractive) now, however reliance on Nvidia remains a risk (even if MPWR solutions are diversified across multiple industries) and an opportunity.
Dividend Safety and Growth
The current dividend yield is small (only around 1.0%), but that is because the share price has gained so much over the last 10 years (+1,218%). Notably, the dividend has been increased ever year for the last seven, and the rate of increase has been very high in percentage terms (see table below).
Also noteworthy, in February the MPWR board authorized a $500 million stock repurchase program (a signal of confidence in long-term growth). And combined with dividends, the company’s capital return strategy demonstrates consideration for shareholders (although investors should monitor execution amid market volatility).
Strong Balance Sheet
Also worth mentioning, MPWR has a strong balance sheet with $1.46 billion in cash and only $16.3 million in debt (i.e. a net cash position of $29.64 per share). Further, the company’s current ratio is 6.42 (indicating strong liquidity). Basically, MPWR is in great financial shape to fund any R&D and acquisitions it sees fit, as well as weather economic downturns (such as any tariff related pressures).
Conclusion
Monolithic Power is a highly attractive investment opportunity. It is benefiting from the AI megatrend (data center servers) as well increasing demand for energy efficiency (this is its niche) across multiple industries. It also has a very strong balance sheet (to weather any economic turmoil) and it trades at a highly compelling valuation (especially considering its high EPS growth trajectory).
It does face risks (such as a significant relationship with Nvidia, tariffs and other macroeconomic headwinds and market cycles), but this is why I always recommend investing through a prudently diversified, yet potently concentrated, investment portfolio of attractive ideas and opportunities.
I currently have no position in Monolithic Power (I sold all my shares last year at a significantly higher price), but I may add back Monolithic Power shares soon.
As always, stay disciplined and prudently diversified as you build out your own unique investment portfolio based on your personal situation and goals.