Ceva Inc (NASDAQ:CEVA) could be a “potential play on Physical AI,” according to Needham analyst Charles Shi, who noted that applications such as cars, drones and robots require semiconductor chips beyond compute and memory because they must interact with the physical world.
The Ceva Rating: Shi initiated coverage of Ceva with a Buy rating and price target of $55.
The Ceva Thesis: The company has is in the "non-AI camp" of semiconductors and needs an AI catalyst, Shi said.
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As AI grows, the benefits of this technology are spreading across the semiconductor industry, the analyst stated. An AI catalyst "may be on the horizon" for Ceva, in the form of Physical AI, he added.
Physical AI: For this branch of AI, physical interaction is more important than generative AI or the more recent innovation of agentic AI, as these largely stay in the virtual world, Shi noted. Physical AI needs a powerful AI model that needs to have the capability to “interact with the real world.”
On the model side, Physical AI should still benefit the existing AI leaders. However, the physical interaction requirement will bring along new beneficiaries. Ceva, being a leader in IoT (internet of things), "should get a new life in the world of Physical AI, in our opinion," the analyst further wrote.
Having a market-leading portfolio in wireless connectivity, sensing, and DSPs (digital signal processors) and NPUs (neural processing units) positions Ceva to win in Physical AI, Shi stated.
While most AI stocks are trading at record multiples, Ceva's valuation remains within historical ranges, presenting an opportunity, "as progress in Physical AI will likely drive CEVA valuation higher," he said.
CEVA Price Action: Shares of Ceva had risen by 4.75% to $48.22 at the time of publication on Monday.
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