Space X supplier STMicroelectronics shares plunge despite raising AI data center sales target
All parties are stepping up efforts to build artificial intelligence (AI) infrastructure and continue to add impetus to semiconductor demand. Against this background, European chipmaker STMicroelectronics raised its data center revenue target for the second time this year, but the company's stock price still fell sharply. The group's clients include Company, Elon Musk's and SpaceX. The group said revenue from its data center business should exceed $1 billion this year and well over $2 billion next year, compared with previous guidance of around $1 billion in 2026 and around $2 billion in 2027. The group had just upgraded those forecasts in June, a sign of how quickly demand for chips that power energy-hungry data centers is growing. STMicroelectronics, like other chipmakers, is benefiting from hundreds of billions of dollars in spending commitments from some of the world's largest technology groups to build AI infrastructure. Shares of STMicroelectronics fell more than 15% on the Milan market on Thursday. Citi analysts wrote in a note to clients that the company's second-quarter results and outlook were broadly in line with average expectations, and that its stock price has more than doubled since January, reflecting growth expectations. "If there is no current momentum to raise expectations, the stock could come under pressure in the short term," they said. Chief Executive Jean-Marc Chery said second-half revenue growth should be higher than the company's usual 15% sequential growth rate, citing data centers and satellites as the main drivers. As the low-Earth orbit satellite industry continues to grow in the coming years, the group is looking to profit from the industry's demand for semiconductors. Such satellites can provide network connectivity to devices in remote areas. STMicroelectronics expects supplying equipment for use in space to generate revenue of well over $3 billion between 2026 and 2028, a forecast that currently excludes potential benefits from orbiting data centers. STMicroelectronics achieved a net profit of US$222 million in the second quarter, compared with a loss of US$97 million in the same period last year. Its gross profit climbed from US$926 million to nearly US$1.22 billion, with a gross profit margin of 34.8%. Analysts had forecast net profit and gross profit of US$209.9 million and US$1.22 billion respectively.