MediaTek partners with Japan's DENSO to create a new automotive landscape; can CPU concept stocks break through valuation barriers?

MediaTek (2454) recently stabilized after a decline, but its stock price has been oscillating within the range of NT$1,380 to NT$1,460 for a long time. Year-end institutional fund closing, market adjustments, and concerns over mobile phone inventory have become short-term suppressing factors. The current P/E ratio is 20.74, which already carries a premium compared to pure mobile chip stocks, but still has room to rise compared to high-end ASIC peers.

However, a latest major strategic partnership may become a turning point that changes market expectations. MediaTek announced a collaboration with global automotive component leader DENSO to jointly develop next-generation advanced driver-assistance systems (ADAS) and customized system-on-chips (SoCs) for smart cabins. This not only marks a breakthrough for this CPU concept stock in the automotive field but could also serve as a catalyst to break through the stock’s sideways trading range.

Three Core Advantages of Cross-Industry Collaboration

For a long time, the market has viewed MediaTek as a smartphone chip manufacturer, causing its stock price to fluctuate significantly with the global upgrade cycle. The alliance with DENSO actually combines the strengths of both parties. MediaTek contributes high-performance, low-power AI computing technology developed under the “Dimensity automotive platform,” while DENSO provides automotive-grade safety certification, system integration, and core competitiveness in the global automaker supply chain.

Automotive Safety Certification as an Entry Ticket

The new chip design will adhere to ISO 26262 functional safety standards, aiming to achieve ASIL-B/D levels—an essential requirement for entering the procurement lists of mainstream global automakers. Through DENSO’s deep roots in the automotive industry and MediaTek’s chip design capabilities, both parties will create products capable of handling extreme safety challenges.

Multi-Sensor Fusion Enhances Autonomous Driving Accuracy

The new chip adopts a heterogeneous computing architecture, integrating AI/NPU accelerators and advanced image signal processors, supporting multi-sensor fusion from cameras, radar, and LIDAR. This technological advantage directly enhances perception capabilities for autonomous and assisted driving, making it highly attractive to traditional automakers and new entrants vying for the electric vehicle market.

Accelerating Mass Production Competitive Edge

Using pre-verified automotive-grade IP and development tools compliant with AUTOSAR standards, both parties pledge to provide a platform that is “ready for immediate mass production.” Compared to other competing solutions, this advantage can significantly shorten development cycles for automakers and seize market opportunities.

Revenue Milestone in 2026

MediaTek’s transformation logic is clearly visible. According to the latest institutional research and company investor briefings, MediaTek is in a critical transition from reliance on smartphones to diversified growth engines.

In the automotive sector, CEO Cai Lixing has already forecasted quarterly growth in 2025. Although large-scale mass production of high-end chips like N1X will only accelerate after 2026, the strategic alliance with DENSO has already substantively secured long-term cooperation opportunities with global mainstream automakers.

More importantly, the AI ASIC (enterprise-grade customized chips) segment. MediaTek has explicitly guided that AI ASIC will contribute approximately US$1 billion (about NT$320 billion) in annual revenue by 2026. Benefiting from the dual engines of AI ASIC and flagship mobile chips, institutional investors are optimistic that MediaTek’s EPS in 2026 could hit a new all-time high.

Valuation Repair Potential Emerges

Historically, MediaTek’s stock price has been trapped within a P/E ratio of 15 to 18 times, mainly due to concerns over excessive dependence on the smartphone business and cyclical risks. However, as the AI ASIC layout gradually takes shape, market valuation adjustments are imminent.

Referring to ASIC peers like Broadcom and Global Unichip (TSCM), which often trade at P/E levels of 25 to 30 times, MediaTek, as a representative of CPU concept stocks, still has long-term potential for valuation recovery. Once market recognition of its diversified growth engines increases, it could drive the valuation center higher.

Short-Term Fluctuations Do Not Change Long-Term Outlook

Although recent MediaTek stock price has experienced technical corrections due to high market levels, foreign capital adjustments, and cautiousness in the mobile market, its long-term growth foundation has been established. The collaboration with DENSO will gradually shed the market’s “over-reliance on smartphones” negative label.

Looking ahead to 2026, MediaTek will transform into a company with complex structure and diversified growth momentum. Automotive business provides a stable revenue base, while AI ASIC offers explosive profit potential. If the US$1 billion ASIC target progresses ahead of schedule, the stock price is highly likely to break through the current sideways range and initiate a new wave of valuation re-rating.