Key Points

• Nvidia's partnership is a big deal for this semiconductor stock.

• Most of the anecdotal evidence, management commentary, and order patterns currently confirm the AI/data center market is all systems go.

Shares in gallium nitride (GaN) and silicon carbide (SiC) semiconductor company Navitas Semiconductor (NASDAQ: NVTS) soared by 28.4% in June, according to data from S&P Global Market Intelligence. The stock has been on a remarkable run recently, and at the time of writing, it's up more than 80% year to date.

Why Navitas Semiconductor is surging

There's no doubt as to the reason for the move. It comes down to the company's relationship with Nvidia, specifically its potential role in developing data center architecture for the next generation of data centers, which are set to hit the market in 2027.

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As previously discussed, the new data centers are likely to be more efficient, require significantly lower maintenance and cooling costs, and offer better reliability. The key to the new 800-volt high-voltage direct (HVDC) current data centers, set to begin in 2027, lies in a fundamental change in how power is distributed from the grid through the data center to the IT racks.

That's where Navitas Semiconductor's GaN and SiC power devices come in. Its GaN chips will help with converting 800-volt HVDC down to the lower voltages necessary to run graphics processing units, which are Nvidia's specialty, in the IT racks. Meanwhile, Navitas' SiC chips are crucial for converting the 13.8 kilovolt alternating current power from the grid to the 800-volt HVDC used in the new data centers.

As such, Navitas' solutions look likely to play a key role in the next generation of data centers that will power the AI revolution.

Ongoing end demand

The news of Nvidia's partnership is obviously a plus. Still, investors will also need to see that capital spending on data centers and end demand from AI applications continue to grow at a rate necessary to support a successful rollout of the new data centers in 2027. And here, Navitas investors have reason to be optimistic. Despite the uncertainties created by the trade tariff conflict, there has been no let-up in the data center spending plans of hyperscalers such as Microsoft and Alphabet.

In addition, anecdotal evidence from data center equipment companies and contractors indicates that investment in data centers continues to run hot.

Image source: Getty Images.

Where next for Navitas

As with hypergrowth stocks, conventional metrics such as trailing earnings won't make much sense right now. Still, Navitas should expect an aggressive sales ramp-up in 2026, ahead of the launch of the 800-volt HVDC data centers in 2027. As such, the ongoing momentum in the development of those sales, along with Nvidia's commentary on the progress of its architecture for the new data centers, is likely to be the key driver of the stock price for the foreseeable future.

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It's no secret that the market has lost interest in oil stocks over the past year. Indeed, all three stocks covered here -- namely, Devon Energy (NYSE: DVN), Diamondback Energy (NASDAQ: FANG), and Vitesse Energy (NYSE: VTS) -- have declined over the last year. As such, they now trade with excellent dividend yields or attractive price-to-free cash flow (FCF) multiples.

Moreover, I think there's a strong possibility that all three companies have recently moved to reduce risk and secure their dividends. Here's why.

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The oil price environment in the first half

Israel's attack on Iran sent the price of oil spiking higher, as investors priced in the risk of ongoing instability in a critically crucial oil-producing region. However, before going into how oil companies responded to this, it's worth putting the move into context.

Image source: Getty Images.

The spike occurred after a few months of oil trading in the low-to-mid-$60 per-barrel range. In addition, sentiment toward oil turned negative following a slower economic growth outlook (due to tariff escalations and ongoing geopolitical tensions) and OPEC's decision to increase production.

WTI Crude Oil Spot Price data by YCharts

There's little doubt that sentiment turned negative after events in the spring. For example, Vitesse implemented a 32% cut in its planned capital expenditures and deferred completion of a couple of wells "in response to current commodity price volatility to preserve returns and maintain financial flexibility." Diamondback cut its planned 2025 capital expenditures to $3.4 billion to $3.8 billion from a previous range of $3.8 billion to $4.2 billion.

While Devon didn't make any adjustments in connection with the commodity price environment, management noted, "With the ongoing market and price volatility, Devon will continue to monitor the macro environment and has significant flexibility to adjust its activity and capital programs" on its earnings release in early May.

What happened after the recent oil price spike

According to numerous reports, the attack on Iran on June 13 triggered a record amount of hedging volumes through Aegis Hedging Solutions. This company assists commodity companies with their hedging strategies. While some of it was possibly oil companies looking to get exposure to potentially higher prices, the likelihood is that it was independent oil companies taking advantage of the spike to hedge their near-term production.

Image source: Getty Images.

As we've already seen, all three companies have either cut their capital spending plans or are monitoring events with the option to do so. In addition, they all utilize hedging as an integral part of their capital allocation strategy, ensuring returns to investors through dividends and share buybacks.

Hedging strategies and dividends

While we won't know for sure until they release their second-quarter earnings, all three are strong candidates to have taken part in the rush to hedge their oil production.

Hedging is an integral part of Vitesse's strategy, which enables it to maintain its $2.25-per-share dividend (current yield: 10%). As of the end of March, Vitesse had 61% of its remaining oil production hedged at an average price of $70.75 per barrel. Look for that figure to increase, or at least an increase in 2026 production volumes hedged.

Diamondback is a conservatively run oil company that uses hedging to ensure its base dividend of $4 per share (currently equivalent to a yield of 2.9%). As of May, it had downside protection in place to $55 a barrel. In other words, at any price of oil above $55, Diamondback has upside exposure to the price of oil.

The strategy is to enable cash flow to return to investors through a variable dividend or share buybacks, in addition to the base dividend. Again, look for Diamondback to have increased hedging activity in the quarter.

As of the first quarter, Devon Energy had more than 25% of its expected 2025 oil production hedged. With that hedging in place, management estimates it will generate $1.9 billion in FCF at a price of oil of $50 per barrel, $2.6 billion at $60 per barrel, and $3.3 billion at $70 per barrel. These figures easily cover its fixed dividend of $0.96 per share (about $650 million in cash). With increased hedging in place, the fixed dividend (currently yielding almost 3%) will be even more secure.

Image source: Getty Images.

Stocks to buy for investors looking for passive income

In particular, Diamondback's and Devon's dividends look very secure, and both have the potential to increase their discretionary dividends, make more share buybacks, or pay down debt. If I'm right, and they, and Vitesse, took advantage of the oil price spike, then passive income investors can sleep even sounder in the knowledge that their dividend income is safe.

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Navitas Semiconductor (NASDAQ: NVTS) stock is seeing big gains in Tuesday's trading. The company's share price was up 8.4% as of 1:30 p.m. ET amid a 1% gain for the S&P 500 index (SNPINDEX: ^GSPC) and a 1.4% jump for the Nasdaq Composite (NASDAQINDEX: ^IXIC).

The company's valuation is surging today thanks to positive developments on geopolitical and macroeconomic fronts. The stock is also rising in conjunction with an announcement that the company has received an award from one of its partners.

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Image source: Getty Images.

A Navitas collaborator is singing the company's praises

Before the market opened today, Navitas published a press release announcing that VREMT Energy had named the company as the recipient of its Outstanding Technical Collaboration Award. The two tech specialists have collaborated on a research and development laboratory using Navitas' GaNFast gallium nitride (GaN) and GeneSiC silicon carbide (SiC) semiconductors to improve power systems for electric vehicles.

News of the award may be increasing investor hopes that a significant product breakthrough will emerge through the partnership.

Navitas stock soars on improving macroeconomic and geopolitical outlook

While Federal Reserve Chairman Jerome Powell indicated that the central banking authority will continue to take a wait-and-see approach on interest-rate cuts, the probability of a rate cut happening at next month's meeting seems to have increased significantly. At the very least, it now seems much more likely that the Fed will serve up one or more rate cuts this year. The change in the rate outlook has investors bidding up growth stocks in the tech sector, and Navitas is benefiting from the trend.

In addition to the possibility that Navitas stock will be a enjoying a better-than-expected macroeconomic backdrop, investors have received some reassuring news on the geopolitical front. A ceasefire between Israel and Iran was announced today, and the market is rising as a major source of potential volatility appears to be de-escalating. Geopolitical turmoil poses a key risk factor to semiconductor companies and global supply chains at large, and indications of global stability are likely to be bullish catalysts for Navitas.

Should you invest $1,000 in Navitas Semiconductor right now?

Before you buy stock in Navitas Semiconductor, consider this:

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Shares of Navitas Semiconductor (NASDAQ: NVTS) rocketed 164.2% in May, according to data from S&P Global Market Intelligence.

Entering the month, Navitas has been a small designer of gallium nitride (GaN) and silicon carbide (SiC) chip designs. These niche chips had primarily targeted electric vehicles and electrified infrastructure. But given the recent downturns in these markets, Navitas had seen its revenue go into reverse and its bottom line continuing to lose money.

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But in mid-May, Nvidia named Navitas as a key partner for Nvidia's upcoming Kyber data center infrastructure, which will be a new architecture to support Rubin-based sever racks beginning in 2027.

While other power chip providers were also named, the fact that Navitas was so small, at just $350 million or so market cap at the time of the announcement, caused a massive rally in the stock.

Navitas then used the opportunity to sell stock and bolster its balance sheet, extending its runway, likely until the 2027 time frame.

Nvidia helps out the tiny Navitas

As Nvidia explained in a May 20 blog post, the current 54 V DC power distribution systems in today's data centers will push up against their physical limits as AI server racks go to needing 200 kilowatts to power next-generation AI chips.

To counter this, Nvidia is developing a ground-up redesign of data centers to an 800 V HVDC power architecture. Nvidia also noted that it was collaborating with a number of power chip and infrastructure companies early on as it develops the new data center power infrastructure, which Nvidia plans to unveil in 2027 for its upcoming Rubin-based systems.

The following day, Navitas published its own blog post explaining how the new 800 V architecture will use both Navitas' SiC chips in the power room of data centers, which convert AC grid power to DC power for the data center, and then GaN-based power converters at the server rack level.

The day of the blogs, May 21, Navitas rocketed 150% higher, before retreating. But then the following week, Navitas disclosed it had exhausted its $50 million equity at-the-market sales facility, and that it had filed for a new $50 million facility. Normally, when a company notes it has and will dilute shareholders, the stock goes down. But since Navitas' stock had gone up so much, investors viewed the capital raise as a positive, in that it fortified Navitas' balance sheet to bridge more of the time gap between now and 2027.

Image source: Getty Images.

Navitas is an intriguing story, but risky

While the prospect of a small company partnering up with Nvidia is highly tantalizing, there weren't any financial terms disclosed in the announcements. That makes sense, as the platform isn't even fully developed yet, and revenues from the venture aren't likely to come before 2027.

So it's hard to say right now if Navitas has moved too far, too fast. Still, last month's cash raise will bolster Navitas' balance sheet, giving it more time to build out its platform in anticipation of the 2027 Kyber rollout.

Should you invest $1,000 in Navitas Semiconductor right now?

Before you buy stock in Navitas Semiconductor, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Navitas Semiconductor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $668,538!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $869,841!*

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Shares of Navitas Semiconductor (NASDAQ: NVTS) are skyrocketing on Thursday. The company's stock soared an incredible 156% as of 1:57 p.m. ET, and as much as 161.8% earlier in the day's trading. The remarkable gain comes as the S&P 500 (SNPINDEX: ^GSPC) gained 0.2% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) jumped 0.6%.

The semiconductor company announced a new partnership with artificial intelligence (AI) chip giant Nvidia after the market closed yesterday.

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A massive partnership

Navitas announced Wednesday that Nvidia has selected the company to help power its next-generation AI data center systems that will include the much anticipated Rubin chips, the upcoming successor to its current, industry-leading Blackwell chips.

Navitas says its gallium nitride (GaN) and silicon carbide (SiC) technologies will help Nvidia solve key scaling issues with its power supply for the incredibly powerful AI-enabling chips. The technologies create "high-efficiency, scalable power delivery for next-generation AI workloads, ensuring greater reliability, efficiency, and reduced infrastructure complexity."

Image source: Getty Images.

A major validation

The deal is important not just because it will bring in significant revenue, but because in partnering with the world's leading AI chipmaker, Navitas' technology is validated to the entire industry.

Gene Sheridan, CEO of Navitas, said, "We are proud to be selected by Nvidia to collaborate on their 800 HVDC architecture initiative," adding, "Our latest innovations... have created new inflections into markets such as AI data centers and electric vehicles."

I think Navitas stock is worth owning; this seal of approval from Nvidia is a game changer, and the company's balance sheet is solid, with minimal debt.

Should you invest $1,000 in Navitas Semiconductor right now?

Before you buy stock in Navitas Semiconductor, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Navitas Semiconductor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $644,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $807,814!*

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See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.