MediaTek Inc.’s stock has seen a remarkable ascent, climbing nearly 40% since late June, driven by a surge in smartphone demand within China and the launch of their cutting-edge AI chip. This impressive performance has eclipsed that of competitors such as Qualcomm (NASDAQ:QCOM) Inc. and the broader Philadelphia Semiconductor Index.

The Taiwanese semiconductor company’s latest offering, the Dimensity 9300 chip, is poised to compete with Qualcomm’s Snapdragon 8 Gen 3, marking MediaTek’s significant stride in the competitive AI sector—a key focus for investors heading into next year. Analysts have responded positively, with a 13% upward revision of MediaTek’s earnings forecast and a target price increase of 27%.

The first smartphone to feature this new chip is the Vivo X100, with OPPO’s Find X7 series expected to follow suit. Both models are designed to handle complex AI tasks and offer enhanced gaming experiences. This innovation is projected to expand MediaTek’s flagship smartphone market share from its current levels to between 30%-35% by next year.

Robert Mumford from GAM Hong Kong Ltd. has highlighted MediaTek’s attractive valuation relative to its growth prospects. The revival of the handset market and the timely release of their system-on-chip have played a crucial role in this valuation. Additionally, there has been a significant reduction in short interest since June’s peak.

After a period of sales decline, MediaTek anticipates growth this quarter, bolstered by an increase in China’s smartphone industry where sales rose by 11% in October. Trading at around 17 times forward earnings with a market cap exceeding $47 billion, MediaTek continues to reinforce its strong presence in Taiwan’s economy.