Ambarella: The New Product Cycle Changes The Narrative

Ambrella receives a Buy rating, despite a high current P/E, due to strong long-term growth prospects from new AI chip cycles. CV75, CV72, CV7, and CV8 chips target higher-value AI applications, supporting higher average selling prices and margin expansion. The Hanwha agreement and automotive telematics provide revenue visibility, while robotics and edge AI offer additional growth avenues. Risks include customer adoption, export restrictions, and inventory build-up, but a 5-year horizon offers an attractive risk/reward profile.

Ambrella (AMBA) is expensive based on its current earnings because at a share price of $61, you are paying over 77 times the forward earnings for FY2027. And even based on FY2029, the valuation remains around 42.