NXP Semiconductors Eyes Physical AI Leadership, Sees Data Center Growth Surge

NXP Semiconductors is positioning itself as a leader in “physical AI” by combining security, safety, real-time processing and reliability for intelligent edge systems in vehicles, factories and infrastructure.

Automotive growth is centered on software-defined vehicles, autonomy-related radar, electrification and connectivity. These areas represented nearly half of automotive revenue in the second quarter and grew more than 20% year over year.

Data-center revenue is expected to reach about $500 million this year , up from $200 million last year, with roughly 20% growth anticipated into next year.

NXP also reported healthy demand and plans to move toward a more asset-light manufacturing model.

NXP Semiconductors NASDAQ: NXPI is positioning its portfolio around “physical AI,” with Chief Executive Officer Rafael Sotomayor saying the company aims to apply its longstanding strengths in security, functional safety, real-time processing and reliability to increasingly intelligent edge devices.

Speaking at the Goldman Sachs Communacopia + Technology Conference, Sotomayor said artificial intelligence capabilities are moving from the cloud to edge devices that can perceive their surroundings, make decisions and act autonomously.

Those applications, including vehicles, factories and infrastructure, require systems that operate deterministically and meet high standards for safety and security, he said.

Sotomayor outlined three priorities for the company: focusing its portfolio on intelligent edge systems, developing system-level solutions rather than selling individual components, and increasing execution speed internally through greater reuse of intellectual property and deployment of AI tools.

He said NXP is assessing its roadmap from a systems perspective because customers must combine compute, analog, sensors and other technologies in increasingly complex products.

The company’s portfolio actions include divesting businesses that do not support the physical-AI direction while investing in relevant talent, intellectual property and technologies.

In automotive, which Goldman Sachs semiconductor analyst Jim Schneider said represents more than half of NXP’s business, Sotomayor described NXP’s offering as a comprehensive portfolio spanning processors, analog products, sensors and radar, wired and wireless connectivity, battery management and electrification.

The company sees software-defined vehicles as its largest automotive growth driver.

Sotomayor said the industry is moving away from numerous isolated electronic control units toward common platforms built around higher-performance processors.

Those systems also require networking capabilities to connect sensors and vehicle functions.

NXP’s accelerated automotive growth drivers were close to 50% of automotive revenue in the second quarter, according to Sotomayor.

Those growth drivers, which include software-defined vehicles, autonomy-related radar, electrification and connectivity, grew by more than 20%, he said.

Sotomayor said NXP expects both higher semiconductor content and potential share gains from its leadership in these products.

He pushed back on the idea that vehicle electronics will consolidate into a single large processor, arguing that infotainment, autonomous-driving functions, power manage...