STMicroelectronics N.V. STM or ST is gaining ground in the fast-growing AI datacenter market, supported by strong demand for optical connectivity and power-management solutions. The company’s second-quarter 2026 performance suggests that AI infrastructure could become a much larger growth driver over the next several quarters.
Revenues from Communication Equipment & Computer Peripherals jumped 50% year over year and 13% sequentially in the second quarter. Growth was fueled by engaged customer programs involving custom products and microcontrollers for optical connectivity. ST is seeing strong traction across silicon photonics ICs, electronic ICs and microcontrollers.
Importantly, ST is expanding beyond optical interconnects. In the power stage of Cloud AI infrastructure, the company is already supplying microcontrollers and high-voltage power and analog products while building a pipeline for low-voltage power and analog solutions. During the second quarter, ST secured multiple design wins spanning optical connectivity as well as silicon and silicon-carbide power solutions.
This momentum prompted management to raise its datacenter revenue ambition. ST now expects datacenter revenues to exceed $1 billion in 2026 and, assuming current demand and customer engagements continue, reach well above $2 billion in 2027. AI datacenter programs, together with LEO satellite communication, are also expected to help push fourth-quarter revenues above $4 billion.
ST is backing this opportunity with investment. The company expects 2026 net capital expenditures at the high end of its $2-$2.2 billion range, partly reflecting accelerated spending on cloud optical interconnect.
Overall, ST’s growing exposure across optical connectivity and power solutions gives it several ways to benefit from AI infrastructure spending. If current design-win momentum converts into sustained production volumes, AI datacenters could become an increasingly important growth engine for STM.
STM Faces Strong Rivals in the AI Datacenter Race
STMicroelectronics faces strong competition from Broadcom AVGO and Monolithic Power Systems MPWR as it expands its presence in AI datacenters. Broadcom is a major competitor in AI infrastructure, particularly in high-speed networking and optical connectivity, areas where STMicroelectronics is seeing strong demand for silicon photonics ICs, electronic ICs and microcontrollers. STMicroelectronics’ Communication Equipment & Computer Peripherals revenues jumped 50% year over year in the second quarter, underscoring its growing exposure to this opportunity. Broadcom, however, has a much larger position in AI networking, raising the competitive bar for STMicroelectronics.
Monolithic Power Systems is another relevant rival as STMicroelectronics pushes deeper into AI datacenter power infrastructure. Monolithic Power Systems provides power-management solutions used in computing and datacenter applications, directly overlapping with STMicroelectronics’ focus on high- and low-voltage power and analog products. STMicroelectronics is building design-win momentum in these areas, but Monolithic Power Systems’ specialization in high-performance power management makes it a key competitor as AI server power requirements increase.
STM Stock’s Price Performance & Valuation Trend
Shares of this multinational semiconductor and electronics company soared 115% year to date, significantly outperforming the Zacks Semiconductor - General industry, the broader Zacks Computer and Technology sector and the S&P 500 Index.
STM Price Performance (YTD)
Image Source: Zacks Investment Research
STM stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 25.04, as evidenced by the chart below.
STM Valuation (P/E F12M)
Image Source: Zacks Investment Research
EPS Trend of STMicroelectronics
STM’s earnings estimates for 2026 have moved upward in the past 30 days to $1.30, but the same for 2027 moved down to $2.77 per share. The revised estimates for 2026 and 2027 imply a significant year-over-year surge of 145.3% and 113.3%, respectively.
Image Source: Zacks Investment Research
STMicroelectronics currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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STMicroelectronics N.V. (STM): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).