UBS advised buying shares of the Apple supplier. It is the next beneficiary of the AI boom

UBS has initiated coverage of shares of Apple's exclusive supplier - little-known chip maker SiTime - with a "buy" recommendation and expects them to grow by almost 20%. According to the analyst, the company will become a major player in the semiconductor market due to its niche leadership, contracts with Apple and Nvidia and the AI boom.

UBS analyst Timothy Arcuri initiated coverage of SiTime with a "buy" recommendation and a target price of $260 - 19% above the Aug. 14 close, CNBC reports. He believes SiTime will become the next big player in the semiconductor world in the coming years, thanks in part to the AI boom. The company works in precision timing, a technology that enables chip synchronization, and supplies MEMS oscillators, devices that power the key chips responsible for operations, data transfer and other chip functions. In effect, it provides the "heartbeat" of electronics and, according to UBS, is leading the way in its niche.

"SiTime is the only turnkey MEMS timing provider in the industry capable of providing system-wide synchronization. The company is unique in that it combines expertise in MEMS, analog technology and subsystems to create solutions that do not exist in the market today," Arcuri said in a note cited by CNBC.

The analyst reminded that SiTime's leadership in its segment has already secured it contracts with tech giants like Apple and Nvidia. According to him, it is the cooperation with Apple will be one of the biggest opportunities for the company's revenue growth. This year, Apple chose SiTime as the exclusive supplier of silicon MEMS oscillators for its own modem, eschewing traditional quartz solutions. Silicon MEMS oscillators are smaller, more energy efficient, more accurate and can be directly integrated into the chip, CNBC explains. "This is such a significant project that we estimate it alone can provide almost all of the revenue growth [SiTime] is now laying out for the market through 2026," Arcuri noted.

The UBS analyst also named SiTime one of the most promising securities for AI investments. "The company stands out among comparable players by capitalization with a high share of AI revenue - we estimate that it could reach 35% by 2027. We expect the current 40% revenue growth rate to continue through at least 2026 and likely longer as the company enters a significantly larger market relative to its current scale," the analyst said. Meanwhile, Wall Street on average expects SiTime's revenue to increase by only 11% and 3% in 2026 and 2027, respectively, CNBC elaborated.

SiTime shares jumped 3% to $224.7 in trading on August 14. This became their highest since June 25. Since the beginning of the year, the company's market value has grown by more than 4%, but over the past 12 months - by 75%. For comparison: the main U.S. stock index S&P 500 has added about 18% over the year.

The majority of analysts who have assigned ratings to SiTime securities - five out of eight - advise investors to buy the company's shares (Buy and Overweight ratings). Another one is neutral with a Hold rating, and the remaining two suggest selling (Underweight and Sell).

The Wall Street consensus price target for SiTime stock is $244.1, which implies an appreciation of nearly 12% from the close on Wednesday, August 13th.

This article was AI-translated and verified by a human editor