Analog Devices completed a $1.5bn all-cash purchase of Empower Semiconductor on 7 July. Empower builds integrated voltage regulators and silicon capacitors — parts that sit on or beside the processor package and perform the final voltage conversion before current reaches the chip. ADI, a Wilmington, Massachusetts maker of data converters, amplifiers and power-management parts for industrial, automotive and communications customers, said when it announced the deal in May that Empower's regulators cut system power consumption by roughly a fifth. On its 19 August call management put the prize in dollars: about 100 gigawatts of data-center construction between 2026 and 2031, worth $1-1.5bn of analog content per gigawatt.

That is the same few square inches where Monolithic Power Systems, a fabless designer of DC-to-DC converters and vertical power modules, earns its valuation. And it is contested. Nvidia's named partner ecosystem for next-generation high-voltage direct-current racks lists ten suppliers — ADI and Monolithic Power alongside Infineon, Renesas, ON Semiconductor, Texas Instruments, STMicroelectronics, ROHM, Navitas and Innoscience.

The concentration fear its own numbers refute

The discount attached to Monolithic Power traces to a specific episode: in November 2024 a broker note argued its allocation in Nvidia's Blackwell line was at risk, with Renesas and Infineon absorbing share, and the shares fell about 25% in a session.

The June quarter says something else. Revenue reached a record $981m, up 47.6%, the fourth straight quarter of acceleration from 18.9% a year ago. Operating income grew 84%, lifting operating margin to 31.0% from 26.5%. On the 30 July call management said enterprise-data revenue rose 45% sequentially "with no concentrated customers," raised the floor of its full-year growth guidance for that business from 85% to 130%, and put its share of central-processor power above 30%. It is sampling 800-volt AC-DC parts built on its own silicon carbide, and doubled its buyback authorization to $1bn.

Where the premium sits now

Gross margins differ by twelve points across these three, so price against trailing gross profit is the comparison that holds. Monolithic Power stands at 35.4x, down from 48.7x three months ago even as trailing gross profit grew 17.3%. Its forward earnings multiple of 47.5x has slipped below the 50-60x range that had it labeled stretched in May. It remains the most expensive of the group by a wide margin — ADI is at 19.9x, Microchip 13.6x, and NXP Semiconductors, the Dutch automotive chipmaker, 7.7x.

ADI's own quarter was its first above $4bn: revenue of $4.02bn, up 39.6%, with operating margin at 40.1% against 30.7% three quarters earlier. Communications grew 84%, and data center is now 80% of that segment. Industrial, still 49% of revenue, grew 53% — the AI build is additive, not the whole story. Free cash flow ran at $4.9bn over twelve months, 36% of revenue. The shares fell on both the day before and the day of the print.

Microchip Technology, the Chandler, Arizona microcontroller house, is the recovery case rather than the AI case. Gross margin has expanded five quarters running, 53.6% to 63.2%, and operating margin swung from 3.0% to 22.7%. Bookings were the strongest in about four years and distributor inventory sits at 25 days, the low end of its range — a channel drained, with restocking still ahead. Its own fabs are far from full, with $450m of equipment idle. September revenue is guided up about 40% year on year.

One mechanism sits under all three margin lines: analog suppliers are recapturing two years of absorbed input costs through outright price increases, ADI averaging 15% across its line from 1 February. Price falls almost entirely into gross profit.

What actually happened to the shares

The de-rating is a three-month event, not a slow bleed: ADI is down 12.5% since mid-May, Monolithic Power 19.4%, Microchip 20.6%. Two sessions did most of it. On 28 and 29 July chip stocks shed more than $1trn on evidence of Chinese progress in advanced chipmaking and doubts about AI capital spending — SK Hynix fell 14.65% in a day — taking the three down 8.6%, 10.7% and 16.1% in forty-eight hours. Both earnings gaps inside the window ran the other way: Microchip rose 13.9% on 7 August, Monolithic Power 8.4% on 31 July. All three now trade with their 50-day averages below where they sat in June.

The setup

Where it stands — Monolithic Power's premium has compressed by a quarter while ADI bought its way into the same power socket. Would confirm — Monolithic Power holding enterprise-data growth above its raised 130% full-year floor at the next print. Would invalidate — ADI or Renesas naming a design win on a next-generation rack that displaces Monolithic Power's vertical modules. Watch next — Monolithic Power's September-quarter report, late October, and Microchip's guided $1.6bn September revenue. Valuation — Monolithic Power 35.4x trailing gross profit and 47.5x forward earnings, versus ADI 19.9x and 30.1x, Microchip 13.6x and 21.1x.