The global semiconductor industry appears to be going through structural tailwinds. Fueled by the artificial intelligence (AI) infrastructure boom, global semiconductor industry annual sales are projected to touch $975 billion in 2026, a historic peak. Furthermore, with sustained growth, annual sales may touch $2 trillion by 2036.
With that in mind, it's unsurprising that semiconductor stocks have surged higher. While some investors might have missed out on the big rally, there also still seem to be pockets of opportunity left. Amid volatility, shares of STMicroelectronics (STM) have trended 43% higher in the last 52 weeks. This lesser-known chip stock seems to hold significant potential.
STMicroelectronics recently announced a partnership with Amazon's (AMZN) Amazon Web Services (AWS), and this multi-billion-dollar collaboration underscores the point of scope for value creation. As part of the deal, STM will be a supplier of advanced semiconductor technologies and products to AWS. Further, STM will issue warrants to AWS for up to 24.8 million shares. Besides establishing credibility, this deal is likely to be a top-line growth driver for STMicroelectronics and STM stock.
About STM Stock
Based in the Netherlands and headquartered in Switzerland, STMicroelectronics is a designer, developer, and manufacturer of semiconductor products globally. The company’s key business segments include RF & Optical Communications, Analog Products, MEMS & Sensors, Embedded Processing, and Power & Discrete Products. In terms of end users, the automotive, industrial and personal electronics segments are business growth drivers for the company.
For fiscal 2025, STMicroelectronics reported revenue of $11.8 billion with a gross margin of 33.9%. For the same period, the firm reported free cash flow of $265 million.
While STMicroelectronics reported revenue degrowth in fiscal 2025, SMT stock has trended higher by 28% in the last six months, in part due to a positive long-term outlook backed by key strategic partnerships.
Multiple Growth Triggers
While revenue degrowth is a concern, STM stock has been in an uptrend. After all, the company has multiple growth catalysts in the next few years. The partnership with AWS is one growth trigger. Similarly, the company’s chip supply to SpaceX for Starlink is expected to double in the next two years.
STM has also indicated that revenue from silicon carbide power devices is expected to return to 2024 levels by next year. This is after a contraction in revenue in 2025. Further, the firm is targeting data center revenue of $1 billion before the end of the decade.
In another important development in December 2025, the European Investment Bank (EIB) signed a €500 million financing agreement with the company. This is the initial tranche for a €1 billion credit line that’s intended to boost Europe’s competitiveness in the semiconductor sector. According to the agreement, 60% of the funds will be utilized toward “high-volume manufacturing capabilities” within Europe while 40% will be dedicated to research & development activities. These investments are likely to translate into growth and provide STM with an innovation edge, especially with the emphasis on R&D.
What Do Analysts Say About STM Stock?
Given the ratings of 17 analysts, STM stock is a consensus “Moderate Buy.” While eight analysts assign a “Strong Buy” rating to STM, another eight have a “Hold" rating while one analyst has a bearish “Strong Sell” rating.
Based on these opinions, STM stock has a mean price target of $33.25 currently, implying potential downside of 1% from current levels. However, the most bullish price target of $45 suggests that STM could rise as much as 34% from here.
One important point to note is that STM stock trades at an attractive forward price-to-earnings (P/E) ratio of 31 times. With analysts estimating earnings growth of 100% and 68% for fiscal 2026 and fiscal 2027, respectively, shares will likely remain in an uptrend.
On the date of publication, Faisal Humayun Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
