Renesas Electronics: Raising Price Target on Data Center Growth Opportunities

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Renesas Electronics: Raising Price Target on Data Center Growth Opportunities

Japan InsightM1. Increasing recognition as an AI/data center beneficiary would support multiple

expansion: We forecast Renesas' data center revenue mix to reach 16% in CY26, already

well above the average for broad-based semiconductor companies ( Exhibit 3 ). We expect

the data center mix to increase further, to 22%, by CY28.

Key growth drivers for Renesas' data center business include: Memory interface: CPU unit

growth driven by agentic AI adoption, as well as content growth from higher memory

bandwidth requirements, including DDR5 upgrades and increasing adoption of MRDIMM,

which carry roughly 3x the content of DDR5 RDIMM. Digital power: Content growth and

ASP increase driven by rising power consumption in AI servers, as well as potential

adoption of Renesas' GaN solutions as data centers transition to 800V DC architectures.

Historically, despite maintaining high gross margins (one of key determinants of

semiconductor valuation multiples) and low inventory levels, Renesas has generally been

viewed as a low-growth company, fueling its valuation discount versus peers. However, we

forecast CY25-28 revenue CAGR of 14%, above the 11% Bloomberg consensus. While

revenue from non-DC applications should grow at around 10% CAGR, partly supported in

part by a cyclical recovery in industrial & factory automation markets, we expect data

center revenue CAGR of 38%, making it the key driver of firm-wide growth.

As the market increasingly recognizes this growth potential, we believe Renesas will be

viewed more as an AI/data center beneficiary, supporting further multiple expansion.

Note that the company’s memory interface products are based on the business acquired