AMBA stock slump on tariff fears may be overdone, analysts say
Ambarella (AMBA) tumbled 17.13% on February 27, closing at $62.83, after CEO Fermi Wang acknowledged that some customers may be reassessing their supply chains in light of trade policy uncertainty.
Not everyone is convinced the slump is justified.
Investment bank Needham remains bullish on Ambarella, raising its price target to $110 even after the tariff-related remarks. Its analysts argue that the company is simply exercising caution rather than signaling a fundamental business disruption.
“Management is incorporating conservatism into (the first half of 2025) due to uncertainty surrounding the impact of government policy decisions,” Needham wrote in a note to investors.
The firm also estimates that Ambarella’s CV5 and CV7 chips will account for half of the company’s revenue growth going forward, reinforcing confidence in the stock’s long-term trajectory.
Tariff concerns weigh on sentiment
While the semiconductor company does not expect to be directly impacted by tariffs, Wang noted on the earnings call that certain customers could adjust purchasing decisions based on supply chain factors and product demand elasticity.
The White House has so far imposed a 10% import tax on Chinese goods, but the broader impact remains unclear. Ambarella supplies imaging processors used in vehicles, drones, security systems, and industrial robotics—industries that could feel ripple effects if manufacturers face higher costs.
Adding to concerns, U.S. President Donald Trump vowed on Thursday to double the existing 10% tariff on Chinese imports starting March 4. That same day, a 25% import tax is set to take effect on goods from Canada, Mexico, and the European Union. The potential for further escalation in trade tensions has left some investors jittery.
Record revenue otherwise
Despite the market’s reaction, Ambarella’s Q4 earnings report marked the third consecutive revenue record.
The company’s Q4 revenue surged 62.8% year-over-year to $284.8 million, marking its third-best annual result since going public in 2020. Meanwhile, its net loss shrank by 23% to $117.7 million in 2024.
CEO Wang emphasized the company’s long-term growth potential, noting that Ambarella has shipped around 30 million edge AI processors. He projects revenue growth in the “high teens” this year, driven by its CV5 and CV7 video processing product lines.