Navitas Semiconductor Stock Tanks: Here’s Why the Market Spat Out This Chip Play

Another day, another tech stock getting chewed up by Wall Street's fickle appetite. Navitas Semiconductor—the gallium nitride darling—just got served a reality check.

What Went Wrong?

No earnings bombshell or scandal here—just the market doing what it does best: overreacting to whispers before breakfast. Semiconductor stocks are getting punished across the board after Taiwan’s Q3 export data hinted at slowing demand. Never mind that Navitas’ tech still dominates fast-charging markets—when the herd stampedes, fundamentals get trampled.

The Bigger Picture

This selloff reeks of hedge fund algos gone wild. Shorts piled into small-cap tech names after the Fed’s latest ‘higher for longer’ murmurs. Navitas, with its juicy 52-week run-up, made for perfect prey. Meanwhile, retail bagholders are left Googling ‘what is GaN?’ as their portfolios bleed out.

Cynical take? The same institutions now dumping NVTS will be quietly accumulating shares before next quarter’s earnings call. Rinse and repeat—Wall Street’s oldest grift.

Image source: Getty Images.

Navitas' Q2 earnings

Turning to the report itself, here's what you'll find: Revenue may have met expectations, but it was still down more than 29% year over year. And although Navitas met expectations on earnings (i.e., losses) as well, the nickel it says it lost in the quarter was only a non-GAAP (adjusted) number. Earnings as calculated according to generally accepted accounting principles (GAAP), in contrast, showed a loss of $0.25 per share.

That's twice the sum Navitas lost per share a year ago. It's also 5 times the $0.05-per-share loss Wall Street is talking about.

Is Navitas stock a sell?

Management tried to put a brave face on this miserable result, with CEO Gene Sheridan insisting that "despite industrywide headwinds [he is] pleased with our teams' Q2 performance," and continuing to focus on making chips for the popular artificial intelligence and energy sectors.

Meanwhile, though, the business keeps shrinking. Management forecast sales in Q3 will be only $10 million and, even non-GAAP, the company expects to continue losing money -- and probably not just in Q3. According to analysts polled by S&P Global Market Intelligence, losses will continue as far as the eye can see, to 2028 at least, and probably beyond.

It's hard for me to recommend buying a stock like that.