Assessing Allegro MicroSystems (ALGM) Valuation After Nvidia GTC Taipei Fuels AI Growth Optimism

Nvidia’s GTC Taipei keynote, which put fresh attention on long term AI chip demand and confirmed Vera Rubin’s full production, quickly fed through to AI supply chain stocks, including Allegro MicroSystems (ALGM).

See our latest analysis for Allegro MicroSystems.

Allegro MicroSystems’ share price reaction to the GTC news fits into a strong recent trend, with a 90 day share price return of 47.73% and year to date share price return of 87.03%, while the 1 year total shareholder return of 87.94% points to strong momentum over a longer window.

If you are watching how AI hardware demand is feeding through to related stocks, it can be useful to scan other AI infrastructure supply chain opportunities using our 48 AI infrastructure stocks.

With Allegro’s share price already up strongly this year and the stock sitting only modestly below analyst targets, the key question now is simple: is there still a mispricing here or is the market already baking in future growth?

Most Popular Narrative: 20% Overvalued

The most followed narrative puts Allegro MicroSystems’ fair value at $42.00, which sits below the last close of $50.33 and frames the recent AI driven rally in a different light.

Allegro MicroSystems is investing in localizing their supply chain in China, which is expected to lead to cost reductions and improve margins over time, although fiscal year 2025 margins might be temporarily impacted due to transitional costs.

Read the complete narrative.

Want to see what kind of revenue curve and margin rebuild this story is built on, and how that links to a premium future earnings multiple?

Result: Fair Value of $42.00 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, there are still clear pressure points, including recent 30% and 33% year over year declines in total and automotive sales, which could keep earnings recovery uneven.

Find out about the key risks to this Allegro MicroSystems narrative.

Next Steps

With sentiment split between concern over risks and optimism about the rewards, it makes sense to move quickly and stress test the story yourself using the 1 key reward and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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