The AI sector is delivering a significant boost to STMicroelectronics, with the company making two major announcements that have sent its shares soaring. The company has dramatically increased its full-year revenue target for its data center business and indicated that a decision on expanding its key French chip manufacturing facility is imminent.

STMicroelectronics NV (NYSE: STM)

STMicroelectronics' CEO, Jean-Marc Chery, stated at an industry conference that accelerating demand for silicon photonics technology from AI data centers is driving a technological shift towards "near-package optics," where optical engines are placed closer to processors. This surge in product demand is creating a need for additional manufacturing capacity.

Chery noted that a decision on expanding the company's Crolles facility in France will likely be made between now and the end of this year. The company's 300-millimeter wafer fab is its primary production base for silicon photonics. While existing infrastructure can support operations into early 2028, the adoption of near-package optics technology is expected to unlock significant new market potential.

Just hours before the expansion comments, STMicroelectronics issued a statement revising its data center revenue forecast for 2026 to approximately $10 billion, nearly double its previous guidance of "well above $5 billion." This marks the second time in three months the company has raised its AI-related business outlook.

Management indicated that if the current growth trajectory continues, revenue could potentially double again by 2027. A company executive expressed strong ambition, stating they aim to capture a 30% market share, having already secured 5% this year, and highlighted strategic support from a major global cloud provider.

Unlike companies focused on AI training GPUs, STMicroelectronics' data center strategy centers on providing the essential peripheral infrastructure, such as power semiconductors for server management, photonic integrated circuits for optical networking, and microcontrollers for intelligent management.

This explosive growth outlook has prompted several Wall Street firms to raise their ratings and price targets for the stock. Analysts cited factors including a projected high compound annual growth rate for data center revenue, benefits from accelerated AI server deployment, a significant earnings beat in the first quarter, and an improved growth profile with greater AI cycle exposure.

The company's stock price has been climbing steadily, reaching a new 52-week high of $71.07 on May 26th. In pre-market trading following the announcements, the stock broke through that level, trading significantly higher.