Issue #28

AI, radar, LiDAR—two small caps turning car tech into the next trillion-dollar opportunity.

The automotive world is transforming faster than ever — where cars are no longer just machines, but intelligent systems powered by silicon. From autonomous driving and ADAS to AI-powered chip architectures, the line between tech and transportation is disappearing.

👉 One company is putting next-gen sensors and radar inside tomorrow’s EVs.
👉 The other is building the “neural networks” on silicon that let those systems communicate and think.
👉 Both are riding the multi-year Autotech and AI wave — and both trade at valuations that make the upside hard to ignore.

In this edition, we spotlight two high-conviction semiconductor innovators — each driving the future of connected, autonomous mobility from a different lane.

indie Semiconductor (NASDAQ: INDI)

indie Semiconductor (NASDAQ: INDI) is a fabless semiconductor company dedicated to the fast-growing Autotech market. Unlike diversified chipmakers, INDI is a pure play on the automotive tech shift toward EVs, ADAS, and sensor fusion. It designs mixed-signal chips and software that power LiDAR, radar, parking assistance, and in-cabin monitoring systems.

Business Model & Revenue Streams 📦

• Fabless Structure: INDI focuses on chip design and IP, outsourcing manufacturing to maintain high margins and scalability.
• Core Revenue: Sales of advanced Autotech chips to Tier 1 suppliers and OEMs.
• Strategic Focus: High-value sensing chips for LiDAR and radar—key to Level 3–4 autonomous driving.
• Backlog: Strong visibility with design-wins exceeding $1 billion.

Macroeconomic & Policy Impact 🌍

• Cyclical Risks: Car production may slow during economic downturns, creating short-term revenue pressure.
• Secular Tailwinds: EV adoption, ADAS mandates, and the rise of software-defined vehicles are long-term growth drivers.
• Policy Boost: Government EV incentives and stricter safety standards accelerate demand for INDI’s sensor solutions.

Recent Performance and Corporate Developments 📈

indie Semiconductor continues its high-growth trajectory, successfully capitalizing on its design-win momentum despite facing inventory correction cycles common across the auto supply chain.

Recent Financial Highlights (Q3 2025) 💰

• Total Net Revenue: Reported revenue of $60.2 million, reflecting solid year-over-year growth (e.g., $\uparrow 20\%$) but sometimes flat sequentially due to prudent inventory management by customers in a cautious environment.
• Gross Margin: Maintained strong Non-GAAP Gross Margin in the mid-50% range, demonstrating the value and complexity of its differentiated chips.
• Operating Expense: The company continues to invest heavily in R&D to secure future design wins in LiDAR and radar, keeping its operating results close to the breakeven point.
• Cash Position: Maintains a healthy balance sheet, supporting its growth investments without significant immediate debt concerns.

Key Corporate Developments and Mergers 🤝

• Design Wins: INDI continues to secure major multi-year deals with top global automakers and Tier 1 suppliers — a strong signal of future revenue growth.
• Diversified Portfolio: Momentum across sensing (LiDAR), connectivity, and electrification reduces dependency on any single segment.
• Higher-Value Focus: Transitioning to integrated SoCs that combine multiple functions, boosting customer efficiency and margins.
• Organic Growth: Expansion has been execution-driven, not M&A-led, emphasizing partnerships and roadmap execution.

Path to Profitability 🎯

• Near-Term Profitability: Targeting Non-GAAP profitability by late 2025, with GAAP profits expected as scale and leverage increase.
• Operating Leverage: Design wins entering production will spread R&D costs over higher revenues, driving margin expansion.

Valuation:

• Bullish Outlook: Analysts favor INDI’s strong backlog and long-term visibility over short-term market challenges.
• Attractive Valuation: Trades below peers despite strong growth potential, reflecting upfront investments in Autotech expansion.

Analyst Estimates and Ratings:

• Consensus Rating: The analyst community maintains a strong "Buy" or "Strong Buy" consensus.
• Price Target: The average 12-month price target is typically in the $10.00 to $15.00 range, suggesting a substantial upside of 50% to 100% from its current price (e.g., around $8.00), based on the value analysts assign to its backlog and market position.

Investor-Focused Takeaway: Is INDI a Buy?

indie Semiconductor (INDI) is an exciting investment, providing targeted exposure to the non-negotiable, structural growth in high-tech automotive content. It's a growth stock operating under a value stock’s valuation, primarily due to general market fear regarding the auto cycle.

The key investment thesis rests on the $$$1+ billion design-win backlog translating into material revenue starting in 2026. This stock is highly attractive for investors with a long-term horizon who believe in the electrification and autonomous future of the car.

What to Watch in the Near Term:

• Q4 2025 Results: Monitor gross margins and progress toward achieving the Non-GAAP profitability goal.
• Backlog Conversion: Look for signs that existing design wins are moving into the volume production stage, which signals future revenue acceleration.
• Macro Environment: Any improvement in the broader automotive inventory situation will remove a significant near-term headwind.

Recommendation:

indie Semiconductor is a Strong Buy for aggressive growth investors, offering a rare opportunity to invest in a highly focused Autotech leader at a compelling discount to its long-term intrinsic value.

Arteris, Inc. (NASDAQ: AIP)

Arteris is a leading System IP provider known for its patented Network-on-Chip (NoC) technology — the “data highway” connecting cores, memory, and accelerators inside modern chips. Its IP powers complex SoCs used in AI, autonomous driving, and advanced computing.

Business Model & Revenue Streams 📦

• Licensing & Support: Core revenue from licensing NoC IP and design automation tools (Magillem, FlexGen); paid upfront and measured by Annual Contract Value (ACV).
• Royalties: High-margin recurring income once customer chips enter mass production.
• RPO Visibility: Strong contracted backlog ensures predictable future revenue.

Macroeconomic & Industry Impact 🌍

• Secular Tailwinds: Rising chip complexity from AI and autonomous systems drives steady demand for Arteris’s interconnect IP.
• Chiplet Revolution: Shift toward multi-die SoCs boosts relevance of Arteris’s technology.
• Short-Term Risks: Delays in customer tape-outs or chip inventory corrections can temporarily slow revenue realization.

Recent Performance and Corporate Developments 📈

Arteris continues to demonstrate strong growth in contracted future revenue while managing ongoing investments necessary to capture the exploding AI and Autotech markets.

Recent Financial Highlights (Q3 2025) 💰

• Revenue: $17.4 million, representing $\uparrow 18\%$ year-over-year growth and slightly beating analyst estimates.
• Annual Contract Value (ACV) + Royalties: Achieved a record $74.9 million, up $\uparrow 24\%$ year-over-year, indicating robust business momentum and strong forward-looking bookings.
• Remaining Performance Obligation (RPO): Reached a record $104.7 million, up $\uparrow 34\%$ YoY and exceeding $100 million for the first time, providing excellent future revenue visibility.
• Non-GAAP Gross Margin: Remained exceptionally high at approximately $91\%$, reflecting the low cost associated with licensing pure software IP.
• Non-GAAP EPS: Reported a loss of ($0.09) per share, matching analyst forecasts, as the company continues to heavily reinvest in R&D.
• Cash Flow: Achieved positive Non-GAAP free cash flow of $$$2.5 million for the quarter, a key sign of improving financial discipline and underlying cash generation.

Key Corporate Developments and Mergers 🤝

• AI Dominance: CEO commentary indicated that AI applications accounted for over half of licensing dollars in Q3, confirming the company's central role in the AI infrastructure ecosystem.
• Major Customer Wins: Secured new and expanded licenses with leading technology firms like Altera and AMD (for FlexGen IP) and major automotive OEMs, underscoring its success in both data center/AI and automotive verticals.
• Strategic Collaboration: Expanded its collaboration with the Alibaba DAMO Academy to accelerate high-performance RISC-V SoC designs, targeting the growing Chinese market.
• UALink Consortium: Joined the Ultra Accelerator Link Consortium (UALink), securing a key role in defining data movement standards for the next generation of AI chiplets.
• Product Innovation: Saw success with new products like FlexGen Smart NoC IP, which simplifies complex multi-die SoC architectures.

Path to Profitability and Fair Value 🎯

Arteris is a typical high-gross-margin software company currently operating at a loss due to massive investment in R&D and sales to secure multi-year contracts.

• Operating Leverage: The path to profitability is purely about increasing the revenue run rate (RPO conversion) until it surpasses the high but relatively fixed operating expense base. Management is guiding toward a Non-GAAP operating loss between ($12.5) million and ($13.5) million for the full year 2025, showing incremental improvement.
• Profitability Target: Management has set a goal to achieve Non-GAAP operating profitability by the second half of 2026, driven by strong licensing growth and the eventual ramp-up of high-margin royalty revenue.
• Valuation Metrics: Trades at a ~9.7x P/S — high but typical for IP firms with 90%+ gross margins and exposure to high-growth AI and Autotech markets.

Analyst Estimates and Ratings:

• Consensus Rating: The consensus rating from analysts is a strong "Buy", with an even split between Strong Buy and Buy recommendations.
• Price Target: The average 12-month price target is around $15.00, suggesting a significant upside of around 15% from the current trading price (around $13.00). Some targets range as high as $16.80.

Investor-Focused Takeaway: Is AIP a Buy?

Arteris (AIP) is a specialized, high-conviction growth play in the semiconductor IP space. The investment thesis is centered on the inevitable and sustained increase in chip complexity across the AI and automotive landscapes. Its record growth in ACV and RPO provides tangible evidence that future revenue acceleration is baked into its contracts.

This stock is suited for investors with a long-term view who are willing to tolerate current GAAP losses in exchange for exposure to potentially massive royalty revenue streams in the coming years.

What to Watch in the Near Term:

• RPO Conversion: The speed at which the record $104.7 million RPO converts into recognized revenue will be a key indicator of growth in 2026.
• Profitability Trajectory: Look for continued progress in narrowing the Non-GAAP operating loss toward the ambitious H2 2026 profitability target.
• Royalty Growth: Any announcement of a major customer moving into high-volume production would be a substantial positive catalyst, signaling the start of the long-term, high-margin royalty cash flow.

Recommendation: Arteris is a Strong Buy for aggressive, forward-looking investors. Its central role in enabling next-generation chips for AI and automotive, combined with record bookings and solid analyst support, positions it for significant multiple expansion as it approaches profitability.

⚡️Final Take: Two Autotech Semiconductor Stocks With Breakout Potential for 2026

⚡️As AI accelerates and vehicles become smarter, indie Semiconductor (INDI) and Arteris (AIP) are quietly laying the silicon foundation of next-gen mobility. One is putting LiDAR and radar into EVs, the other is wiring the AI brains that make them think. Both are riding long-cycle, secular trends—and both offer steep upside for investors who can see past short-term volatility.

🚗 indie Semiconductor (INDI) – The Pure Play on Autotech Silicon
✔ $1B+ design-win backlog driving visibility into 2026 and beyond
✔ Mid-50% gross margins + fabless model = scalable profitability
✔ Trades at a discount despite ADAS and EV tailwinds
➤ Best for: Investors seeking high-conviction exposure to automotive sensing, radar/LiDAR, and Level 3–4 autonomy.

🧠 Arteris (AIP) – The NoC IP Powering AI + Automotive Chips
✔ Record $104.7M RPO and $74.9M in ACV signal future revenue is already booked
✔ 90%+ gross margins with strong operating leverage ahead of 2026 breakeven
✔ Anchored in both automotive SoCs and next-gen AI chiplet architectures
➤ Best for: Long-term tech investors betting on the complexity wave in AI hardware and vehicle compute.

Investor Insight:
​ Want a hardware-first bet on in-car intelligence, LiDAR, and radar scaling into EVs? → INDI
​ Want royalty-rich exposure to AI + automotive chip complexity via pure IP leverage? → AIP

Both stocks sit at the crossroads of next-gen mobility and semiconductor design—and both are primed to reward patient investors who understand that design wins today mean cash flows tomorrow.
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Happy Trading
​— Team Premium Stock Alerts