Is MPWR a good stock to buy? We came across a bullish thesis on Monolithic Power Systems, Inc. on Contrarian Indicator’s Substack by Cameron Fen. In this article, we will summarize the bulls’ thesis on MPWR. Monolithic Power Systems, Inc.’s share was trading at $ 1,328.80 as of July 20th. MPWR’s trailing and forward P/E were 93.92 and 54.05 respectively according to Yahoo Finance.
Photo by Yogesh Phuyal on Unsplash
Monolithic Power Systems, Inc. provides semiconductor-based power electronics solutions. Its fastest-growing customer base right now is AI data centers, and that’s central to understanding the stock. AI servers use far more power than regular servers, and that power has to be delivered in more precise, complex ways than before, which is exactly what MPWR specializes in. First quarter 2026 revenue rose 26.1% year over year to a record $804.2 million, while adjusted EPS increased 26.2% to $5.10 — solid, but not spectacular for a stock trading at about 54 times next year’s earnings, versus roughly 26 times for Analog Devices (NASDAQ:ADI) and 38 times for Texas Instruments (NASDAQ:TXN). The gap suggests that investors aren’t paying for this year’s growth, they’re betting on several more years of it.
Read More: 15 AI Stocks That Are Quietly Making Investors Rich
Read More: Undervalued AI Stock Poised For Massive Gains: 10000% Upside Potential
The bullish case rests on AI infrastructure play with the idea that AI servers are only going to need more power management over time, not less. Each new generation of AI chips draws more electricity and needs more sophisticated circuitry to deliver it cleanly, so MPWR can grow two ways at once — more AI servers get built industry-wide, and each server needs more MPWR components than the last generation did. The evidence so far backs this up: MPWR’s “Enterprise Data” segment, its AI server business, grew 97.7% year-over-year and now drives nearly 80% of the company’s total revenue growth.
Management just raised its stated manufacturing capacity target from 4 billion to 6 billion units, essentially signaling that it expects demand large enough to need that much capacity. If cloud companies keep building bigger AI clusters and replacing older servers, bulls see multiple years of runway ahead, not just one good quarter. If that plays out, MPWR’s earnings a few years from now should be much higher than today’s— which is why investors are willing to pay 54 times next year’s earnings. In addition to this, the recent dismissal of the Bel Power Solutions lawsuit eliminates a key legal overhang, which reinforces the broader investment case.
The thesis is also backed by analysts’ consensus average target of about $1,599 on MarketBeat, implying nearly 21% upside from MPWR’s July 17 price of roughly $1,312, while MarketScreener’s average target of about $1,789 implied approximately 36% upside. MarketBeat’s $1,599 price target implies EPS of about $29.61 at a 54 times forward multiple, which is roughly 111% above MPWR’s trailing twelve month EPS of $14.06. MarketScreener’s $1,789 target implies EPS of about $33.13 at the same multiple, roughly 136% above trailing EPS. With quarterly EPS growing 26.2% year over year in Q1, investors should watch carefully whether this strong growth pace continues, as slower earnings growth would make these targets harder to support.
However, a slowdown in the AI capex spending could be a key risk for the thesis. If AI demand is really this strong, you’d expect MPWR’s profit margin to be improving too, since selling more should mean better pricing power and efficiency. It isn’t. Gross margin was 55.5% in Q1 2026, unchanged from last quarter and actually lower than a year ago. Rapid revenue growth without margin improvement may suggest that the AI boom hasn’t yet translated into better profitability, just more volume. Also, inventory rose to $619.2 million from $454.8 million, with inventory days rising to 157 from 146. A company with flat margins and piling inventory, with an ask above 54 times earnings raise valuation concerns.
Hedge fund positioning provides a similarly nuanced signal. As per our database, 49 hedge fund portfolios held Monolithic Power Systems at the end of the first quarter, down slightly from 50 in the previous quarter. The modest decline suggests that institutional investors remained broadly constructive on Monolithic Power Systems’ AI infrastructure exposure, Enterprise Data growth, and long-term earnings potential, despite some profit taking or valuation concerns. By comparison, 109 hedge fund portfolios held Analog Devices, up sharply from 86, while Texas Instruments was held by 71 hedge funds, down from 78, and ON Semiconductor was held by 58, down from 63. The divergence suggests institutional investors showed the strongest increase in conviction toward Analog Devices during the latest quarter, while hedge fund interest in Monolithic Power Systems remained relatively stable despite its premium valuation and strong AI-driven growth outlook.
Short interest data also shows some investor caution around MPWR, with 6.07% of its float sold short, well above Analog Devices at 2.76% and Texas Instruments at 2.07%. However, bearish positioning remains lower than ON Semiconductor, where short interest stands at 10.51% of float. This suggests that MPWR’s premium valuation and high growth expectations are drawing more scrutiny than its larger analog peers, but bearish sentiment is still less severe than for more challenged semiconductor names such as ON.
The bullish trade remains constructive if revenue reaches guidance, Enterprise Data segment stays strong, EPS grows sustainably, and inventory days decline from 157 toward management’s projected 140. The key question is not simply whether AI spending will grow, but whether MPWR can turn several years of rising server volumes and higher power content per system into enough earnings and cash flow, quickly enough, to justify a valuation far above its peers.
Previously, we covered a bullish thesis on Monolithic Power Systems, Inc. (MPWR) by Hidden Market Gems in April 2025, which highlighted its reasonable valuation, fabless model, pricing power, diversified customer base, and AI exposure. MPWR’s stock price has appreciated by approximately 136.50% since our coverage. Cameron Fen shares a similar view but emphasizes on AI driven growth, premium valuation, margin pressure, and execution risks.
Monolithic Power Systems, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held MPWR at the end of the first quarter which was 50 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.
Disclosure: None.
