What Happened?

Shares of power management chips maker Monolithic Power Systems (NASDAQ: MPWR) fell 24.9% in the morning session after Edgewater Research analysts revealed that the company's (MPWR's) allocation to Nvidia's Blackwell line of GPUs (Graphics Processing Unit) is "at risk." 

The analysts added, "We hear NVDA will go through their confirmed orders to MPWR for the next few quarters, but we hear NVDA has canceled half of MPWR's backlog, cutting all of their unconfirmed orders." Edgewater Research noted that the root cause of MPWR's issue is "unclear" but could be related to some product issues identified earlier in the year. 

As a result, the analysts think the situation creates a risk to MPWR's business, especially its Enterprise data segment, given investors' high hopes for the company's AI capabilities.

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What The Market Is Telling Us

Monolithic Power Systems’s shares are quite volatile and have had 18 moves greater than 5% over the last year. But moves this big are rare even for Monolithic Power Systems and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 9 months ago when the stock gained 17% on the news that the company reported strong fourth-quarter results and provided strong revenue guidance for the next quarter, which topped analysts' expectations. Its revenue and EPS also narrowly outperformed Wall Street's estimates during the quarter. 

The company also highlighted the expanded market opportunity estimated at $1 billion following the acquisition of Netherlands-based startup Axign B.V, which provides programmable multi-core digital signal processors. 

On the other hand, its gross margin fell, and its operating margin decreased during the quarter. Overall, this was still a strong quarter for Monolithic Power Systems.

Monolithic Power Systems is up 1.1% since the beginning of the year, but at $609.14 per share, it is still trading 35.7% below its 52-week high of $947.16 from August 2024. Investors who bought $1,000 worth of Monolithic Power Systems’s shares 5 years ago would now be looking at an investment worth $3,717.

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