HK Movers | Innoscience Jumps Nearly 8%. Jefferies Maintains "Buy" Rating on Key NVIDIA Partnership

INNOSCIENCE stock jumped nearly 8% in Hong Kong market. Jefferies released a research report stating that INNOSCIENCE joining NVIDIA's 800V DC power supplier list holds great significance for gallium nitride (GaN) and INNOSCIENCE.

INNOSCIENCE serves as a new supplier for silicon solutions and is the only Chinese semiconductor company on the list. The firm maintains a "Buy" rating for INNOSCIENCE.

NVIDIA's 800V DC power supply represents a completely new architecture with significantly increased voltage. This architecture was released as a preliminary design at the 2025 GTC, designed to support total power consumption of 570kW per rack, potentially for the next-generation AI chip Ruben (current generation being Blackwell). Given the high power consumption, NVIDIA increased the power rack voltage to reduce current, thereby alleviating the burden on copper wiring (higher current requires more copper wire for power transmission).

Gallium nitride will play an important role in high-voltage AI racks due to its advantages of higher transmission efficiency, higher frequency, and smaller, lighter equipment. The firm believes that power consumption levels in AI data centers will continue to rise. Meta recently discussed its plans to operate 1GW data centers using 1MW racks (1MW=1000kW, compared to NVIDIA's current 570kW design). This should make gallium nitride an increasingly preferred technology over silicon-based MOSFET solutions.

Jefferies indicates that INNOSCIENCE's entry into NVIDIA's supply chain may be accelerated due to TSMC closing its gallium nitride foundry. Among the aforementioned NVIDIA silicon suppliers, Navitas is already listed. However, Navitas's primary foundry partner TSMC will close its gallium nitride foundry in mid-2026, forcing Navitas to turn to PSMC. This demonstrates the risks of using fabless suppliers.

The firm believes that INNOSCIENCE's IDM (Integrated Device Manufacturing) status, advanced technology, and the world's largest gallium nitride foundry capacity may be key factors in NVIDIA selecting it as a partner.

The firm estimates the preliminary Total Addressable Market (TAM) for AI server gallium nitride at $2.5 billion, meaning INNOSCIENCE's stock price surge last Friday capitalized potential profits at only 5x price-to-earnings ratio. The firm agrees that it's still early to quantify the potential, as the 800VDC architecture and Ruben chip design have not been finalized yet. The firm expects mass production to begin in 2027.

However, the firm attempts to roughly estimate TAM using the current NV72 (based on GB200) as an example, concluding that NVIDIA's portion alone reaches $1.5 billion, or $2.5 billion if including cloud service providers' ASICs. Assuming INNOSCIENCE captures a 50% market share (main competitors likely being Infineon and Navitas) with a 25% net profit margin, the firm estimates that the $1.5 billion increase in INNOSCIENCE's market capitalization last Friday only capitalized AI server potential profits at 5x price-to-earnings ratio, indicating that long-term upside potential remains enormous. The firm also notes it would not be surprised by further profit-taking after such a significant rally.