MediaTek – Data Centre? What Data Centre?

MediaTek has been hiding its light under a bushel

• With all the excitement around Nvidia and AMD in data centres, MediaTek’s business in this space has gone virtually unnoticed, which is a surprise, as it is already a billion-dollar business.
• In its Q3 25 conference call, CEO Rick Tsai stated that MediaTek was on track to generate $1bn of revenue from data centres in calendar 2026, which should grow to “multiple billions in 2027”.
• This fact barely filtered out to the stock market as the next day’s trading was unremarkable and the shares went on in the next month to make a 12-month low before recovering at the end of November.
• By contrast, Qualcomm’s stock registered a 10% move when it disclosed that it would be earning revenues from the data centre, although it very quickly gave up those gains.
• The point here is that the market is blissfully unaware that MediaTek even has a data centre business, which creates an opportunity for a rally in the share price if this materialises as forecast by Mr Tsai.
• The same is true for Qualcomm as RFM has estimated that Humain alone could add $2bn in revenues to Qualcomm, which the market for its own reasons has also completely discounted.
• Unlike Qualcomm, MediaTek is currently addressing the non-Nvidia custom accelerator market, but it is not yet making a chip of its own.
• Instead, it is offering its services and its IP to help others build and optimise their own custom accelerators.
• This is similar to the rumoured PC chip that MediaTek is working on with Nvidia, where the GPU is from Nvidia, but the packaging and other elements of the chip have been designed by MediaTek.
• I suspect that the CPU is also being designed by MediaTek, but this has yet to be confirmed.
• In custom accelerators, MediaTek is using its historic, cultural and geographical closeness to TSMC to offer better packaging, leading-edge nodes, optmisations and manufacturing than many of the hyperscalers would be able to achieve on their own, given their lack of experience and history in chip design.
• This, combined with its IP in connectivity, SRAM and DTCO optimisation as well as PPA, is how it has managed to attract at least one very large customer where MediaTek is doing a large part of the integration of the component pieces of the accelerator.
• The trend in the market is also a major tailwind as a large part of the capex spend on a new data centre is on GPUs, where Nvidia’s gross margins are more than 70%, and many are seeking to reduce total costs.
• Hence, one way to reduce the cost of compute to use alternatives other than Nvidia, although Nvidia’s habit of being at least one generation ahead of everyone else has kept its market share above 80%.
• Another tailwind is the fact that as AI systems become more complex and able to produce more tokens per dollar invested, the packaging and optimisation become more complicated, which plays to MediaTek’s historic strengths.
• I suspect that there is also a chip in development, as this will be needed to address the segments of the market that want a complete solution and do not have the desire or the resources to design it themselves.
• A complete chip would also allow MediaTek to address more of the opportunity and therefore grow its share of the capex spend in the data centre.
• MediaTek is pushing against an open door here, as this segment of the market is dominated by Broadcom, and customers are keen to have second sources just in the same way that they are for Nvidia.
• Consequently, it is not inconceivable that MediaTek becomes a much larger player in this market, which, given the growth in AI spending, could become a meaningful part of revenues.
• Looking at the estimates for MediaTek, I don’t think that very much of this is priced in, and with the shares at 21.5x 2026 PER, there is plenty of space for both a rerating and an earnings upgrade.
• If it were not so difficult for retail to buy MediaTek (no ADR or GDR), I would certainly consider swapping my Samsung position (which has run up a lot) into this.