Ambiq Micro Stock Pops on IPO Debut: What's Fueling the Surge?
Key Points
Figma wasn't the only IPO stock to rocket higher last week.
Ambiq aims to dominate at Edge AI, through efficiency and battery-life improvements.
A shift in strategy is putting Ambiq on a more profitable path.
Software company Figma may have garnered the most attention from investors monitoring initial public offerings (IPOs) last week, but another tech name also nearly doubled in its market debut.
Ambiq Micro (NYSE: AMBQ) priced its IPO at $24 per share on Wednesday, July 30, and shares were trading at over $50 on Thursday before closing at about $40 one day later. The semiconductor chip company could be tapping into what might be the next frontier for the expanding artificial intelligence (AI) market.
Image source: Getty Images.
Edge AI is where the action takes place
Much of the hype in the AI sector is coming from spending to build out data centers and compute power. Hyperscalers provide large-scale cloud infrastructure, platforms, and software services to businesses. Hyperscalers need massive processing power for that cloud-based AI infrastructure. Ambiq plans to integrate its ultra-low power technology into those high-performance compute applications, as well as automotive chip products.
For now, though, Ambiq is addressing another need at the edge of AI applications with end users. Power efficiency is more critical in end markets such as personal devices, medical and health monitoring, and smart-home products due to small device size and limited battery life.
Ambiq does this with its Sub-threshold Power Optimized Technology (SPOT) platform. The company says incorporating SPOT results in a 2x to 5x reduction in power consumption compared to conventional integrated circuit designs, depending on the application. The platform gives customers more flexibility to run AI models faster with faster inference rates. Having significantly reduced power needs also allows the platform to add more sensors, shrink battery size, or extend battery life.
Ambiq is shifting its sales strategy
AI usage on SPOT is expanding quickly, according to Ambiq. Its customer base includes China-based technology giant Huawei, leading GPS-device maker Garmin, Alphabet's wearable technology subsidiary Fitbit, and Chinese smartphone maker Xiaomi.
Amid an uncertain geopolitical environment and tariff risks, the company is working to reduce its reliance on Chinese customers. While sales in the first quarter only grew by 3.4% year over year, net sales from end customers in the United States, Europe, and Asia (outside of mainland China) soared 94%. Ambiq is also achieving higher gross margins outside of mainland China and says it will continue to focus on growing its business outside of China.
With the shift out of mainland China, gross profit margin soared from 41% to 53.3% year over year in the first quarter. The company also generated positive cash flow from operations of $1.4 million in Q1. So it is on a path to profitability.
Always consider the risks
Valuation doesn't look to be one of the main risks associated with Ambiq after its IPO. Its market cap is just about $670 million after its third day of trading. Compare that to Figma with a market cap already at $60 billion. Figma's current revenue run rate is much higher at about $1.5 billion, but its valuation at 40 times sales still makes Figma a very expensive stock to buy.
Ambiq's price-to-sales ratio is comparably low at just over 10. Yet there are risks to be aware of. Ambiq currently depends on a limited number of customers for most of its revenue. Huawei accounted for about 41% of net sales last year. Garmin and Alphabet comprised approximately 24% and 21% of net sales, respectively, in 2024.
The move away from China will certainly change that dynamic, though. In the first quarter of 2025, only 6% of net sales were to end customers in mainland China, down from 50% during the first quarter of 2024.
Ambiq also doesn't have long-term commitments from its end customers, so business results could change abruptly. Yet if Edge AI is the next frontier beyond the buildout of data center compute power, Ambiq is nicely positioned. That helps explain its successful debut in the markets last week, and should warrant more research from investors interested in an early investment in Edge AI.
Howard Smith has positions in Alphabet and Garmin and has the following options: short September 2025 $260 calls on Garmin. The Motley Fool has positions in and recommends Alphabet and Garmin. The Motley Fool recommends Xiaomi. The Motley Fool has a disclosure policy.