# Semtech Says AI Chip Demand Now Outpaces Its Supply by Three Times > Source: > Published: 2026-08-25 06:01:35+00:00 *Semtech says AI customers want three times more of its networking chips than it can currently build, and the small chipmaker reports earnings today with Wall Street watching whether that bottleneck is turning into real revenue.* Semtech (NASDAQ: SMTC) reports fiscal second-quarter results after the market closes on Tuesday, August 25, 2026, and the headline print will not be the real story. Analysts polled by S&P Global expect earnings of $0.61 a share, up from $0.41 a year ago, on revenue of $328.67 million, a 27.6% jump from last year. Those are solid numbers. But almost nobody outside the chip industry has heard of Semtech, and that's exactly the point. CEO Hong Hou has been telling investors that demand for the company's AI networking chips is running at roughly three times what Semtech can actually build right now. Semtech doesn't make GPUs. It makes the smaller, less glamorous pieces that let racks of GPUs talk to each other fast enough to be useful: transimpedance amplifiers, driver chips, and the optical interconnects that move data between servers inside a data center. That's the whole business, in one sentence. Nobody buys a Semtech chip to put on a keynote slide, but without parts like these an AI cluster is just very expensive silicon sitting idle. It's why Susquehanna analyst Christopher Rolland raised his price target on the stock to $200 from $170 in July, keeping a Positive rating. Needham reaffirmed its own $200 target the same month. Across 14 analysts tracked by S&P Global, the average target sits at $205.25, over 60% above where the stock has recently traded. ## Where the crunch shows up Semtech's data center business is where the crunch actually shows up. The company expects data center sales to climb roughly 35% sequentially this quarter. Behind that number: continued 800G shipments, and the first real volume from its next-generation 1.6T optical interconnects, already shipping to a U.S. hyperscaler. That single customer relationship, still unnamed publicly, is doing a lot of the heavy lifting behind the growth numbers. Hyperscalers racing to build bigger AI clusters need faster links between servers, and 1.6T is the next rung up from the 800G standard that dominates data centers today. None of this comes free. Racing to fill a backlog three times the size of your factory means qualifying new suppliers, running fabs harder, and betting that yields hold up while margins don't slip. Simply Wall St has flagged exactly that tension: execution risk sits right alongside the growth story. It's a real risk, not a footnote. A company Semtech's size doesn't have Nvidia's or TSMC's cushion if a production ramp goes sideways. [Visa and Mastercard Join 26 Firms to Set Rules for AI Agent Payments](https://startupfortune.com/visa-and-mastercard-join-26-firms-to-set-rules-for-ai-agent-payments/) Rain launched the Agentic Payments Alliance on August 18, 2026, bringing together 26 companies including Visa, Mastercard, Circle and Solana to build shared standards for how AI agents get authorized to spend money on someone's behalf. The move comes as Visa and Mastercard already run competing agent-payment protocols and Congress's CLARITY Act... - [how AI agents can make payments safely](https://startupfortune.com/visa-and-mastercard-join-26-firms-to-set-rules-for-ai-agent-payments/) - [visa mastercard payment standards for AI agents](https://startupfortune.com/visa-and-mastercard-join-26-firms-to-set-rules-for-ai-agent-payments/) Semtech has also been cutting away the parts of itself that don't fit this story. On August 13, the company agreed to sell its cellular module business, the piece that traces back to its 2023 acquisition of Sierra Wireless, to Taiwan's Compal Electronics for $62 million in cash. That's a clean break. The deal is expected to close in the fourth quarter of Semtech's fiscal year, and it hands off a legacy IoT connectivity line that had little to do with where the company wants to compete now. Data center and LoRa connectivity are the two businesses where Semtech says it has the strongest conviction. Everything else is for sale. You don't sell off a whole division unless you actually believe in what's left. ## The market isn't playing along The timing isn't gentle. Nvidia has dropped for seven straight sessions, its longest losing streak since September 2022. The broader chip trade has wobbled hard through August. Micron fell nearly 6% in a single session, AMD and Intel each dropped more than 3%, and the Philadelphia Semiconductor Index closed down 2.7% on one of the month's worst days. If you're looking for reasons to be nervous about anything with AI chip in its name, the sector has handed you plenty this month. Semtech is betting that a genuine supply crunch, not sentiment, is what actually decides what happens next. That's the bet. A company that can't make enough of something people want to buy has a very different problem than one nobody wants. Tuesday's numbers, and whatever Hou says about the 1.6T ramp on the call, will tell you which kind of problem this really is. **Also read:** [Solana's First On-Chain Vote Could Erase $1.36 Billion in Future SOL Supply](https://startupfortune.com/solanas-first-on-chain-vote-could-erase-136-billion-in-future-sol-supply/) • [SEC Subpoenas Wall Street Banks Over AI Hedge Fund Situational Awareness](https://startupfortune.com/sec-subpoenas-wall-street-banks-over-ai-hedge-fund-situational-awareness/) • [Klarna Beat Every Estimate and Still Had Its Worst Week as a Public Company](https://startupfortune.com/klarna-beat-every-estimate-and-still-had-its-worst-week-as-a-public-company/)