Tower Semiconductor Launches High-Volume AI Optical Chips

Tower Semiconductor shares climbed approximately 8% on Thursday, outpacing the broader market as the Nasdaq rose 1.45% and the S&P 500 gained 0.91%. The price movement followed an announcement that the company has begun high-volume shipments of laser-integrated photonic integrated circuits, or PICs, in collaboration with NewPhotonics.

These chips are engineered to meet the increasing demand for faster and more energy-efficient optical connections within artificial intelligence infrastructure. Current production supports data rates ranging from 800G to 1.6T, utilizing Tower’s PH18DA silicon photonics platform to integrate lasers, amplifiers, modulators, and photodetectors on a single die.

NewPhotonics Partnership Expands Capacity

The joint venture with NewPhotonics marks the transition from development to mass production for serviceable PICs. By integrating optical components directly onto the silicon photonics platform, the manufacturing process aims to reduce complexity while enhancing efficiency and reliability for data center operators.

The companies have outlined a roadmap for higher bandwidth solutions, with volume production of 6.4T products planned for the future. Specifically, shipments of NewPhotonics’ NPC505 chipsets are expected to commence in the first half of 2027, extending the product line beyond current 1.6T capabilities.

Valuation Remains Premium To Peers

According to data from GN stocks/chips, Tower Semiconductor carries a Buy consensus rating with an average price forecast of $320.40. Recent coverage initiations reflect this optimism, with Stifel setting a $270 target and Bank of America Securities assigning a $367 forecast, both maintaining Buy ratings.

Despite the strong momentum and quality scores in the Benzinga Edge scorecard, the company’s value score stands at 12.59. This low metric indicates that the current valuation is relatively expensive, reflecting the market’s premium pricing for AI-related growth prospects.

Technical Indicators Show Mixed Signals

At $218.03, the stock trades 3.6% above its 20-day simple moving average but remains 3.4% below its 50-day average of $226.41. The relative strength index stands at 51.65, a neutral reading that suggests buying pressure has not reached overextended levels.

Key technical resistance is identified near $226.50, while support is located around $184.50. Although the stock is 14.8% above its 200-day moving average, it remains significantly below its 52-week high of $319.94, indicating room for further appreciation if the intermediate trend strengthens.