MediaTek is on track for its best quarterly performance ever. Since the end of March this year, the company's share price has surged by 187%, adding over $130 billion to its market capitalization and making it one of the standout performers in Asian markets. Investors are betting that its AI-specific integrated circuit design partnership with Alphabet will help the company reduce its reliance on the smartphone business and open up a new growth engine.

This valuation reassessment reflects strong market expectations for MediaTek's AI transformation. Reports indicate that MediaTek has successfully secured a major order for Alphabet's eighth-generation TPU training chip, taking responsibility for the crucial I/O Die and back-end design. The chip is scheduled to begin shipping in the fourth quarter of 2026, with market forecasts suggesting related revenue could reach $7 to $8 billion by 2027. Counterpoint Research predicts that by 2028, MediaTek will capture approximately 26% of global AI ASIC server compute chip shipments, becoming the world's second-largest supplier after Broadcom.

Smartphone chips currently still account for about half of MediaTek's revenue, leaving it vulnerable to weakness in the smartphone market. Data shows that in the first quarter of 2026, MediaTek's global smartphone chip market share fell to 32% from 38% a year earlier, with memory supply shortages and shrinking demand for entry-level phones cited as primary reasons. However, investors bullish on its AI prospects are already looking further ahead.

To strengthen its AI business, MediaTek is aggressively expanding. The company expects AI-related revenue this year to reach around $2 billion, with further growth anticipated by 2027. MediaTek previously projected it could capture up to 15% of the estimated $80 billion ASIC market by 2027. Analysts at Mizuho Securities believe this target may still be conservative.

As the share price climbs, MediaTek's valuation has reached historical highs. Its forward 12-month price-to-earnings ratio stands at approximately 45 times, compared to 24 times for Broadcom and 21 times for Taiwan Semiconductor Manufacturing. Despite this, consensus estimates show its earnings per share for the coming year have been revised upwards by more than 30%. Among the 31 analysts covering the stock, 29 have a "buy" rating, 2 have a "hold" rating, and none have a "sell" rating.